The “Tenant’s Trap” – Saving a Bootstrapped Startup

The Startup Vulnerability

For a small startup, cash is oxygen. Every rupee is invested in product development, hiring, or marketing. To keep overheads low, most Indian startups operate out of rented premises, co-working spaces, or shared commercial hubs.

A dangerous assumption often exists here: “The building owner has insurance; if anything happens, we are covered.”

This is the Tenant’s Trap. The landlord’s insurance usually covers only the building structure (walls and pillars). It rarely, if ever, covers the tenant’s expensive laptops, servers, furniture, or fit-outs. If a fire happens, the landlord gets paid for the wall, but the startup gets nothing for the burnt assets inside.

The Client Scenario

A boutique digital marketing agency in Bengaluru was operating out of a rented 1,500 sq. ft. commercial space. Being a design-heavy firm, their capital was heavily invested in high-end hardware—15 iMacs, specialized rendering servers, and premium ergonomic furniture. The total value of their office assets was approximately ₹35 Lakhs.

The founders were focused on growth and initially saw insurance as an “unnecessary expense.” They assumed the building’s security and the landlord’s policy were sufficient protection.

The Disha Insurance Intervention

Six months prior to the incident, the founders met with a Disha Insurance advisor for a general financial review. We immediately identified their exposure. We explained that in the event of a burglary or fire, their loss would be total.

We advised them to purchase a comprehensive “Office Package Policy.”

• The Resistance: The founders were hesitant to pay the premium, thinking the risk was low.
• Our Advisory: We demonstrated that the premium cost was less than the price of one office chair. We structured a policy covering “Fire & Allied Perils” for contents and “Burglary” for theft. Trusting our expertise, they signed the cheque.

The Incident

On a long weekend, a short circuit in the UPS room of the office triggered a severe fire. While the fire brigade controlled the blaze within an hour, the damage was done. The heat melted the server casings, and water from the fire hoses destroyed the iMacs and furniture. The office was a total wreck.

As predicted, the Landlord’s insurer visited, assessed the damage to the walls and flooring, and processed a claim for the building owner. They flatly refused to cover the startup’s computers, citing no insurable interest.