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Summary: Just as lessees of commercial property have a use interest in any building additions, alterations, or improvements made at their expense, a tenant of residential property has a similar interest. When a tenant invests in improvements in property leased as a residence and is able to use and enjoy the additions, all is well. But suppose a fire or other insurable cause of loss damages or destroys the improvements. Since the improvements belong to the landlord, the tenant has lost no property. However, the tenant has lost the use of the property, and it is the right to use the improvements for the term of the lease that creates the tenant’s insurable interest in them.

Improvements and betterments insurance as written for commercial risks is the subject of a separate discussion; see Improvements and Betterments Coverage. It should be noted that most residential forms do not include the adjustment procedure spelled out in commercial forms governing recovery when improvements are damaged but not repaired or replaced.

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