Property Management Insurance Coverage Explained

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What is Property Managers Insurance?

Property Manager Insurance is coverage for professionals who manage rental properties, such as apartments, condos, or commercial buildings that are owned by others. This insurance is necessary for property managers due to the inherent risks involved in managing properties. Someone could become injured or have their property damaged due to your management, oversight, or mistake. Errors in management could come in many other forms from simple administrative mistakes to complex matters like tenants filing legal claims for issues like discrimination, libel, and/or wrongful eviction.

Additionally, property insurance can cover the properties you manage against some weather-related risks, as well as vandalism and theft. 

A property manager or property management company needs coverage to protect against these types of risks to avoid costs or claims related to the scope of services they provide.

Who Needs Property Management Insurance?

If you manage any property and/or buildings on behalf of a landlord, you need property management insurance to ensure you are properly covered. It is common for property management professionals to oversee the management of residential buildings, including residential apartment complexes, or commercial buildings, including office buildings or main street properties.

Why Do Property Managers Need Liability Coverage?

Like any business in the service industry, especially one that provides highly specialized professional services to clients, insurance for property managers is one of the most important things. Property managers have a duty to their clients and to the public. Not only do property managers act as a middleman between a property owner and a renter, but they must also ensure that property-related issues don’t negatively impact all stakeholders.

While managing the rent, tenants, repairs, accounting, taxes, and more, there are always risks of third-party claims, lawsuits, and financial damages that the property management business can suffer. Clients or third parties can be unsatisfied with the services provided, claim misconduct, negligence or mistakes, suffer injuries or property damages arising from the services provided, etc.

When a claim or lawsuit is filed, liability coverage the intent is that property managers are protected against the incurred financial losses of these claims or lawsuits and defence costs.

What Kind of Property Management Risks Are There?

There are several risks that property managers face, either from their services, their clients, or the public. While property managers are highly trained and the chances of risks and accidents can be small, it’s important to be protected.

Property managers have many administrative tasks, from handling multiple rental contracts to maintenance and filing incident claims. Legal issues and financial loss can occur if the property manager loses a document, overlooks a contract clause, or misses an important deadline, causing their clients to suffer losses.

There are also risks of physical property damage during the maintenance and repair process. If the exterior wears down or a home system fails, your tenants can file claims. Regular inspections or requiring renter’s insurance programs can mitigate risks, but physical damages always remain a concern.

Tenants can also suffer injuries or discrimination because of the services provided by the property manager or on their premises. If tenants file a claim against the property manager for these reasons, the ensuing damages can also be costly.

What Does the landlord’s Property and Liability Insurance Cover?

Property insurance covers the physical assets the property manager manages against select weather-related perils. Common insured perils include fires, smoke, wind, floods, lightning, snow and ice, and more. It can also cover property damages caused by vandalism, damage by third parties, or theft. Since property managers are responsible for many properties, as well as the maintenance of those properties, having clarity on what insurance is in place at the properties they manage is critical to ensure there are no gaps and/or misunderstandings between property managers and their clients.

Liability insurance protects the property owner and in some cases the property manager against claims resulting from damages or injuries to third parties. It can cover the costs of medical bills, legal fees, and any settlements or payouts agreed upon. A commercial general liability policy is highly recommended for the landlord and property manager as property managers are often the target of a lawsuit filed by the property owner.

What Does Property Management Insurance Cover?

Common coverages included in a property management insurance policy are commercial general liability and errors & omissions liability (also known as professional liability).

Property management insurance coverage also protects property managers against allegations of negligence, claims, and damages through errors & omissions /professional liability coverage. The commercial general liability coverage covers allegations of negligence resulting in bodily injury and/or property damage.

The errors & omissions/professional liability portion of property management insurance coverage policies are usually issued on a “claims-made” basis. This means coverage is triggered when a claim is filed and you report it to the insurance company. Policies typically have a one-year term, with an annual premium and deductibles on a per-claim basis. In contrast, commercial general liability coverage is almost always written on a per-occurrence basis (click here for the differences).

Property Management Insurance Coverage Claims Examples

  • Wrongful Eviction: As a property manager, you are responsible for evicting tenants when and/or where necessary. You have recently evicted a tenant. In evicting the tenant, you did not follow the proper eviction process. The evicted tenant is now bringing forward a claim against you.
  • Tenant Discrimination: A potential tenant claims you did not rent a property to them based on gender, race, or religion.
  • Resident Injury: A tenant or visitor falls and injures themselves on your property.

Is a Property Manager Liable?

Yes. Property managers can be held liable for issues with the physical properties they manage and for issues of general liability and professional liability (errors and omissions). General liability insurance includes such things as someone slipping and falling on one of your properties and the potential for damage to the property of tenants or others.

As a property manager, you can also be held liable for errors or omissions in your work. For example, you could be held liable if you fail to charge a rental deposit, and a property owner has to cover damages. Tenant discrimination and wrongful eviction could also be considered errors in performing the tasks you are responsible for.

How Much is Property Management Insurance?

The cost of property management insurance depends largely on the size and scope of your operation. It would include the number of properties you manage, the size, the scope of services offered, and value of those properties, the number of employees you have, and other details. The type of coverage you choose will also influence the cost of your property management insurance. Property management insurance is a cost of doing business and can protect your business from many risks.

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