Property Management Insurance Coverage Explained

What is Property Manager Insurance? 

Property Manager Insurance is coverage for property owners who own or manage rental properties that may include condos or apartments, as well as commercial or office buildings. This insurance coverage is necessary due to the inherent risks involved in managing properties. Someone could become injured or have their property damaged as a result of your management or oversight or mistake. Errors in management could result in administrative risks and tenants could file claims for issues like discrimination, libel 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 needs to have coverage to protect against these types of risks in order to avoid costs related to repairing and replacement. 

Who Needs Property Management Insurance?

If you own or manage any property and/or buildings, then you need Property Management Insurance to ensure that you are properly covered. It is common for property managers to oversee the management of residential buildings including condos or 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 services to clients, insurance is one of the most important things. Property managers have a duty to their clients as well as 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 all stakeholders aren’t negatively impacted by property-related issues.

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 manager can suffer. Clients or third parties can be unsatisfied with the services provided, claim misconduct or mistakes, suffer injuries or property damages arising from the services provided, etc.

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

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 happening can be small, it’s important to still be protected.

Property managers have many administrative tasks. From handling multiple rental contracts to maintenance and filing incident claims, there are lots of responsibilities. 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 damage to the properties during the maintenance and repair process. If the exterior wears down or a home system fails, your tenants can file claims. Having 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 Property and Liability Insurance Cover?

Property insurance covers the properties that 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 or theft. Since property managers are responsible for many properties, as well as the maintenance of those properties, having property insurance is important to reduce financial loss from any repairs and replacements.

Liability insurance protects property managers against any claims resulting from damages or injuries to other people or property. It can cover costs of medical fees, legal costs, and any settlements or payouts agreed upon.

What Does Property Management Insurance Cover?

Common coverages included in Property Management Insurance is property coverage for the physical building and/or property, commercial general liability, and errors & omissions liability (also known as professional liability). In addition to ensuring that your building and/or property is protected from common perils such as fire, it is typical to also have coverage for rental income replacement, sewer backup coverage, tenant damage coverage, and on-premises pollution coverage, just to name a few.

Property Management Insurance coverage also protects property managers against allegations of negligence, claims and damages through the errors & omissions /professional liability coverage. Allegations of negligence resulting in bodily injury and/or property damage are covered by the commercial general liability coverage.

The errors & omissions/professional liability portion of Property Management Insurance Coverage policies are usually issued on a “claims-made” basis. What this means is that 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 having the responsibility of 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 is claiming that 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, as well as for issues of general liability and professional liability (errors and omissions). General liability includes such things as someone slipping and falling on one of your properties, as well as 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, if you fail to charge a rental deposit and a property owner has to cover damages, you could be held liable. 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 and value of those properties, the number of employees you have, and other details. The type of coverages 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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