Property Management, Tenant Selection, Real Estate News & Tips

What Type of Insurance do Property Managers Need?

By on October 29, 2015 in Education with 3 Comments

Property Manager InsuranceWhen establishing yourself as a professional property manager, it is important to acquire appropriate insurance to protect your business, yourself and the properties you manage for others.

Who needs property management insurance coverage?

If you are involved in the following activities, it is important to have the right coverage and insurance policies:

  • Renting or leasing residential real estate to others
  • Managing rental properties for others
  • Contracting services for rental properties owners (ex. hiring or supervising property maintenance for rental properties)

Lawsuits  related to this industry are common, and failure to have the proper protection in place can leave your business exposed to unnecessary risk.  Your clients also trust you to carry the right type of insurance to protect their biggest asset.  The right policy can serve as a incentive to chose you as their property manager and will provide a tool to demonstrate your professionalism and care when acquiring new business. 

What type of property management insurance should I have?

Property managers need to have insurance that covers their business, their clients, their tenants and the properties they manage.  While the insurance needs of property management companies are similar in some ways to other businesses – for example coverage for property, liability, workers compensation and health coverage – there are many ways in which the needs of property management firms are unique.

A well designed insurance policy will protect you from liability claims, legal proceedings specific to the industry, and losses caused by perils, like fire, vandalism or burglary.

Errors and Omissions Insurance – Like any service industry that provides a specialized service, property managers should carry professional liability insurance, often referred to as Errors and Omissions (E&O) Insurance.  This insurance is designed to protect you from claims against invasion of privacy, wrongful eviction, hiring unlicensed contractors, and other similar actions specifically related to the industry.  Essentially, this insurance protects the tenant and landlord from a financial loss that is directly related to a mistake make by the property manager.

General Liability Insurance – While errors and Omissions Insurance covers specialized services offered by a property manager, you will also need General Liability insurance.  General Liability insurance is intended for the day to day business practices of any company, regardless of the industry.  

You should have both Errors and Omissions coverage and General Liability insurance set in place for your property management business to cover the day to day business and specialized services provided.

Tenant discrimination insurance– Tenant discrimination can be a major concern for property managers.  Protection in this area is not always covered by general liability policies, so make sure to ask specially about adding tenant discrimination insurance.  Adding tenant discrimination insurance can cover property managers when current, prospective or former tenants allege wrongful discrimination.

Extra Protection for Property Managers

Are your owners and tenants insured?  Make sure your tenants and owners are properly insured themselves too.  

When a property manager is hired by a rental property owner, they perform a variety of services on behalf of the owner.  In general, a property manager will not have the same financial interest in the home as an owner, however they do take on the risk and liability as if they are the Homeowner, leaving them at risk to claims concerning the home itself.  Some example of claims that are not covered by a typical property manager’s insurance policy include injury on the property, burglary, fire, water damage, etc.  In order to remain protected from all angles, you should require that the homeowner add you, as the property manager, as an additional insured to their landlord insurance policy.   

Renters insurance for your tenants helps cover the cost of replacing your tenants’ stolen or damaged personal possessions, it can also cover the cost of damage caused to the property by negligence.  Ultimately, it is in a landlord’s best interest to encourage tenants to get renters insurance so the homeowner isn’t left with a bill due a tenant being unable to cover the cost of damaged property or court fees.

Where can a property manager find insurance coverage?

Here are some tips from Nolo on choosing insurance for your property management business:

  • Purchase enough coverage to protect the value of the property and assets.
  • Be sure the policy covers not only physical injury but also libel, slander, discrimination, unlawful and retaliatory eviction, and invasion of privacy suffered by tenants and guests.
  • Carry liability insurance on all vehicles used for business purposes, including the manager’s car or truck if it’s used on the job

If you’re a real estate investor or private owner renting out your home, you need landlord insurance. Landlord insurance is more than just homeowners insurance.

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About the Author

About the Author: Kaycee manages marketing and media relations for Rentec Direct, bringing a unique perspective to the world of property management and proudly shares industry news, products, and trends within the community. .


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There Are 3 Brilliant Comments

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  1. Another type of a policy enhancement is for covering the costs & co-ordination of persons that have had their personal information “hacked” into via your online, cloud-based system, OR the actual theft of files that contain personal information on your owners and residents.

    • kayceew says:

      You bring up an excellent point Norbert! Thank you for your input. Data security is extremely important, especially since property managers deal with highly personal information regarding their owners, properties, and tenants. Make sure any online software you use is up front about their security systems and check to see if Two-Factor Authentication is in place before you store private files in any cloud-based software. While cloud-based storage is seen as highly secure, you can never be too careful and additional insurance towards hackers could protect you in a worst case scenario.

  2. Glenn says:

    Use different password for EVERY website and login. There have been many cases where a website was hacked and the passwords we’re used to get into other sites.

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