Do property managers need insurance?
Property management comes with a lot of responsibilities, whether you handle residential homes or large offices, retailers, restaurants, or commercial other buildings. Duties like screening tenants, collecting rent, and handling repairs and maintenance (for starters) means you face numerous risks each day that require the right property management insurance.
You have a lot of responsibility, you’re constantly interacting with clients, tenants, and the public. In short, yes, we recommend all property managers to consider commercial insurance. You need to have the right financial protection.
Property Management Insurance Requirements
Most forms of commercial insurance can benefit property management companies. But considering your interaction with the general public, as well as the physical nature of the job at times, two important coverages come to mind first: liability insurance and workers’ compensation insurance.
Property Management Liability Insurance
What is general liability insurance? This coverage is a basic insurance policy that protects your business from many of the random things that can go wrong on the job.
- Property Damage: While doing some light repairs on an apartment building you manage, one of your tools falls and cracks a pedestal sink. General liability will cover the replacement or repair costs, rather 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, fracturing their ankle. Your general liability policy will 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 and 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.
Workers’ Comp for Property Managers
Workers’ compensation insurance 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.
- 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 injured while working, 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.
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.
You’ve got a lot on your plate as a property manager, and 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. Consider commercial property insurance. This policy 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, this policy will cover replacement and repair costs.
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 to make sure your gear is covered.
Commercial Auto Insurance
If your business owns a vehicle, you need commercial auto insurance to have the right protection. Your personal auto policy will not extend coverage to a vehicle owned by your business. Coverage includes:
- Physical Damage Coverage
- Bodily Injury Liability Coverage
- Property Damage Liability 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.
Also known as excess liability insurance, umbrella policies are a little something extra–in the very best way.
If you feel that the coverage limits offered by your liability insurance policies are not high enough, you can purchase additional liability coverage through an umbrella policy to significantly increase 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.
Liability Insurance 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 general liability and commercial property insurance into a packaged deal, allowing for more coverage at a lower price than purchasing each of the policies separately.
Workers’ Comp Cost
In order to calculate the cost of workers’ compensation, a few factors must be considered:
- Your Location
- Your Industry
- Your Payroll
- Your Claims History
All states have differing rules and regulations, and because workers’ comp is state-regulated, it’s rates differ, as well. 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.
Secondly, your industry impacts the cost of workers’ compensation. Workers’ comp is all about risk, so the more risk you face at work, the greater 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, so the more employees you have, the greater the cost of your insurance.
The next element that impacts workers’ comp premiums is your history of claims is if you’ve had past insurance claims. If so, this means your experience modifier, or mod, will be increased. You want a low mod. If you haven’t had a history of claims, your mod should be a 1.0, which is great. If you have had losses and your mod is a 2.0, for example, that means the price of your policy will be double.
Lastly, we’ve got the expense constant. This covers administrative fees and tends to cost around $200.
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