The basics

Do property managers need insurance?

As a property manager, you play many roles – rental agent, rule enforcer, inspector, handyman, and the list goes on. You want to focus on taking care of properties instead of worrying about lawsuits due to unexpected events or mistakes. Screening tenants, collecting rent, and dealing with evictions are just a few daily risks that require the right property management insurance.

Property management comes with a lot of responsibilities. Whether you handle residential homes or large offices, retailers, restaurants, or commercial other buildings. You have a lot of duties that each comes with its own set of risks.

You need to have the right financial protection for your business. Because when things go wrong– as they often do– you will be the one held responsible.

Property Management Insurance Requirements

Many forms of insurance can help property management companies. But considering your interaction with the general public, as well as the physical nature of the job at times, you’ll likely need a combination of insurance coverage depending on your unique situation.

Liability Insurance

Property Manager E&O Insurance

A good insurance plan will most likely include property management E&O insurance. Also called professional liability insurance, it covers legal expenses a property manager may encounter from errors and oversights related to business decisions. If a client alleges that you failed at your duties or were professionally negligent. Just a few claims examples include wrongful or negligent evictions, discrimination claims from a tenant, and the failure to perform professional duties spelled out in your contract.

Tenant discrimination: Protect yourself from claims of denial of housing because of race, religion, sexual orientation, etc. This type of claim may come up at some point, even if you feel you haven’t discriminated against anyone.

Wrongful eviction: Tenant claims of lost rent checks or unfair eviction for noise or other types of disturbance.

Another example is an owner that claimed a property manager didn’t keep the property up well enough. When the housing market went soft, they couldn’t sell. They had to sell the house for less and then sued the property manager for failure to upkeep the property. And they demanded the difference in the price.

E&O protects you from:
-Negligence accusations
-Errors and oversights
-Failure to provide promised services
-Contract disputes

Legal fees and court costs can really add up if something happens. It doesn’t matter how baseless the claim is. With so many things to take care of, like collecting rent and coming up with rental prices, it’s best to make sure you’re protected.

Property Manager General Liability Insurance

General liability insurance coverage is a basic insurance policy that protects your business from many of the random things that can go wrong on the job. Resident injury or property damage is just one thing that can go wrong. As ensuring the safety of tenants and guests is one of your duties. Handling routine maintenance is another duty that calls for the right liability insurance plan.

Coverage Overview:

  • Property Damage: While doing some light repairs on an apartment building, one of your tools falls and cracks a pedestal sink. GL would cover the replacement or repair costs. That’s much better than you footing the bill yourself.
  • Bodily Injury: One of your tenants stops by your office to drop off rent. They slip and fall on a freshly mopped floor and fracture their ankle. Your GL policy would pay for the hospital visit.
  • Personal/Advertising Injury: This section of the policy pertains to claims involving libel, slander, copyright infringement, and false advertising.
  • Legal Costs: Let’s say you’re doing some paint touch ups in a condo you oversee. The bucket of paint spills all over the heart pine floor. The entire floor needs to be sanded and resealed, so the condo owner files a lawsuit against you. Court costs and other legal fees are covered by this policy.

Not having a liability insurance plan in place can put you at risk as a small business.

Additional Coverages

General liability and workers’ compensation insurance are definitely great coverages to have, but if you want to make sure you’re really protected, there are a few more policies you might want to consider. They include commercial property, inland marine, commercial auto, and umbrella insurance.

Workers’ Comp for Property Managers

Workers’ comp covers property managers and their employees in the event of a workplace injury. Should you get hurt or fall sick due to work-related activity, workers’ comp will cover the costs.

Coverage Highlights:

  • Getting Hurt on the Job: This could range from anything to Carpal Tunnel Syndrome to tripping over a power cord and breaking your wrist. If you get hurt on the job, workers’ comp will cover the medical bills.
  • Falling Ill from a Work-related Activity: If you’re a property manager who also does handy work, you know how harsh some of the maintenance supplies can be. If you fall ill due to inhalation of harmful chemicals, your health costs will be covered.
  • Lost Wages: Should you or an employee require time off work to recover, your lost wages will be supplemented.
  • Employers’ Liability: If an employee files a claim regarding failure or to provide a safe work environment, attorney’s fees, settlements, and other legal costs will be covered.
  • Employee Lawsuits: Should an employee file a lawsuit for lost wages or medical expenses, you’ll be covered by your workers’ comp policy.

If a resident or visitor gets hurt on a property you manage, you’ll be glad you have general liability.

Property Insurance

You’ve got a lot on your plate. You need equipment (tablets, phones, computers) to help you keep track of all the information about your properties such as rent amounts, work orders, and lease dates. Property insurance protects your building space/office, work tools, equipment, inventory, and supplies in the event of fire, theft, or any other sort of disaster. Should something happen, it will cover replacement and repair costs. A property manager generally has to have insurance coverage for the buildings they manage–but it does depend on your contract with the property owner.

Something to note: This policy extends protection to your belongings while on your business premises. If you are in transit or at other locations, you will need inland marine insurance (also known as Tools & Equipment Insurance) to make sure your gear is covered.

Business interruption insurance is sometimes included in a commercial property policy. It protects your income while repairs are made to the property if something unexpected happens (fire, storm, etc.). If you can’t collect rental income for some period of time, your earnings are protected.

Commercial Auto Insurance

If your business owns a vehicle, you need commercial auto insurance to stay protected. Your personal auto policy will not extend coverage to a vehicle owned by your business. Coverage includes:

  • Physical Damage Coverage
  • Bodily Injury Coverage
  • Property Damage Coverage
  • Collision Coverage

If you hire, rent, or borrow vehicles for work, hired and non-owned auto insurance is the right policy for you. This also extends coverage to you and your employees in the event personal vehicles are being used for work-related purposes.

Umbrella Insurance

Also known as excess liability insurance, umbrella policies are a little something extra–in the very best way.

If you feel that the limits on your policies are not high enough, you can purchase extra liability coverage. An umbrella policy increases the coverage limits on all your other policies.

All insurance policies have limits of liability, which is the cap in which an insurance carrier will pay for a claim. Once the limits have been met, the carrier is no longer responsible for paying for the loss. The remaining balance has your name on it.

The great thing about umbrella policies is that it adds extra protection to an existing policy. So if you have a commercial auto policy with limits of $500,000, but have a claim of $625,000, your umbrella policy will pay for the additional $125,000.

The price of an umbrella policy is not much in comparison to paying $125,000 out-of-pocket.

The cost

Property Manager Liability Cost

Many small property managers are able to secure a liability policy at an affordable rate, at around $395 per year. That’s less than $35/month. This number can vary a bit based on your location, payroll, size, and experience. The more properties you manage, the bigger your insurance premium.

Want more bang for your buck? Check out a business owner’s policy, or BOP. BOPs combine liability and property insurance into a packaged deal. That gives you more coverage at a lower price than purchasing each of the policies separately. And the protections are usually tailored to your industry.

Workers’ Comp Cost

In order to calculate the cost of workers’ comp for property managers, a few factors must be considered:

  • Location
  • Industry
  • Payroll
  • Claims History

Each states has its own rules and regulations for workers’ comp. That impacts the rates from state to state. For example, some states require business owners and their employees to be covered, while others only mandate the employees have coverage. The more people that are included, the greater the cost of the policy.

Your industry also impacts the cost of a policy. Workers’ comp is all about risk. The more risk you face at work, the bigger your classification rate will be. Property managers face less risk than a tree trimmer, but more risk than an accountant.

The third factor to consider is your number of employees. Workers’ comp premium is calculated based on payroll. The more employees you have, the greater the cost of your insurance.

The next element that impacts price is your history of claims. If you’ve had claims, your experience modifier, or mod, will be higher. You want a low mod. Your mod should be around 1.0, which is great. But if your mod gets as high as 2.0, your policy price could double.

Lastly, the expense constant covers admin fees. It tends to cost around $200.

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