Expert Strategies & Tips for Buying Property Management Insurance

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Property Management Insurance is pretty complex.  

Property Managers need to choose their insurance wisely because they are at risk of lawsuits all the time.  

Being the representative of the landlord is a difficult task.  

Property Management Insurance

Having the right insurance is absolutely necessary.

This article will help educate new property management company owners and also add value to those who have been in the business awhile.

I am a licensed property and casualty insurance broker who helps clients find the right kind of insurance at a reasonable price.  

As an independent agent, I have the opportunity to work with a wide variety of business owners and insurance companies.

The nature of my job gives me an unusual perspective.  

Like a property manager, I am also a sort of middle man.  

I work with insurance companies and policyholders to help everyone get along and play nice.

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Insurance in general is complex.  

The transfer of risk from the policyholder to the insurance company via a long and sometimes confusing written contract with many different caveats and coverage language intricacies make it one of the most difficult tasks of any business owner.

Property Management insurance can be confusing because of the nature of the work and the extreme risks assumed while providing the service to the property owners.

This article is meant to be a general guide to the insurance most property managers will need to consider.  

It is not an exhaustive study of all the complexities that each individual Property Manager may face in his or her entire career.

For specific, tailored insurance advice, it is best to request a quote from a few different brokers, ask a lot of questions, and make sure you go with an agent or broker who you trust and believe to know what they are talking about. 

Expert Strategies and tips when considering property management insurance

If I were a Property Manager looking for insurance, there are four things I would do when shopping for insurance.

  • Complete the application myself.  A lot of insurance agents will try to “save you time” by filling out the application for you.  This can lead to denied claims if the information is not accurate.
  • Ask a lot of Questions.  Insurance is confusing.  Its also boring.  You should ask someone who lives and breaths insurance to explain the policy and its limitations.  If the person you are talking to seems unsure of numerous answers, go with another agent.
  • Get at least 3 quotes.  You need to get a gauge for where the broader market sits on price.  You can’t know if your price is good unless you get a few quotes.
  • Ask for a Marketing Summary:  If you are working with an independent agent, he has access to a few different insurance companies.  If he shopped around for you, he will be able to tell you where the other quotes he didn’t choose to present came in on price. 

What Is Property Management Insurance?

Property management insurance is a specialized form of coverage for professional property managers and companies. 

It’s a form of general liability insurance that protects a business from claims of errors, omissions, or negligence. 

Property management e&o insurance applies to both residential and commercial properties.

Residential building tenants may file a legal claim due to bodily injury, property or contents damage, and related claims.

Insurance protects professionals in the industry by covering legal and medical costs.

Third-party damage, such as breaking personal property within someone’s unit, may also be covered.

Other areas covered include wrongful eviction, tenant discrimination, and other legal action.

There are multiple business insurance policies you should consider, including, the 'bundle' aka business owners policy (BoP), commercial property insurance, and commercial general liability insurance

What Basic Insurance Should a Start Up Property Management Company Have?

There are three basic insurance  policies that a start up Property Management Company should buy:

  1. Professional Liability:  coverage for your Errors and Omissions as a professional.  If you give someone the wrong instructions or forget to do some task that ends up causing your client thousands of dollars, Professional Liability will be the policy you need.

  1. Business Owner Policy:  This is a combo of many different types of insurance that can be built to fit your specific budget and needs.  The two main coverage types are Property and General Liability.  The options are endless with this policy, you could property get a dozen different quotes if you wanted to spend the time.  

  1. Workers Compensation:  Also known as Work Comp or Workman’s Comp, this policy pays to cover the medical bills and lost wages of your employees if they are hurt while working for you.  

What Insurance Should an Established Property Management Company Have?

The top three policies a larger and more established Property Manager should have are:

  1. Employee Theft:  as a fiduciary of your client’s funds, you may need this one as a start up, but you would be surprised to see how many Property Managers are not carrying their own policy.  Employee Theft Insurance covers you if your employee starts stealing from you or your clients.

  1. Employment Practicies Liability:  if an employee or 3rd party sub-contractor sues a Property Management Company, alleging harassment, discrimination, or wrongful termination (just to name a few reasons), then the only policy that would cover the damages award in court and the defense costs is a Employment Practices Liabilty policy.

  1. Cyber Liability:  This is the hottest insurance policy on the market.  The rise of crypto currency has given cyber criminals an easy way to extort money from Property Managers and other types of business.  They will hold your computer system hostage until you pay the ransom in Bitcoin or whatever other type of crypto currency they choose.  

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Should a Property Manager Have Insurance?

Every property management company should have insurance to cover any legal claims made against managers or staff.

Property manager insurance coverage is essential due to various legal matters in residential and commercial buildings and their tenants. 

It’s a vital form of protection against unexpected claims and expenses.

Property Management Insurance

Do I Need Property Management Insurance?

Insurance for property management company is required for protection from lawsuits and related legal matters. 

Commercial property management liability insurance is recommended with 100% coverage. 

This insurance coverage applies to companies and professionals who employ staff, who have access to sensitive and financial information, and may encounter allegations of fraud or misuse of funds.

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What Insurance Does a Property Management Company Need?

The type of property management insurance required depends on the type of property and what’s included in the scope of the building, whether it’s residential or commercial, and risk factors.

Each policy is prepared individually to include various factors, such as the number of tenants, high-risk areas, maintenance, and related items.

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Other Insurances Property Management Companies May Consider

If you’re a professional property manager or own a property management business, you’ll want to consider additional types of insurance, which offer more protection.

These options include commercial liability, which protects you against claims of bodily injury or property damage; professional liability, which explicitly covers companies that provide a service; and cyber security insurance, which protects access to financial and sensitive information.

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Compare Business Insurance Quotes

Choose from a variety of business insurance options. Professional Liability, Cyber Insurance, Business Owners Policy, Workers' Compensation.  

Comparison quotes are quick, easy, and free!

How Much Does Property Management Insurance Cost?

The cost of property management insurance is specific to many factors.

The most common criteria taken into consideration when developing a policy include the location of the building, the number of buildings included on the property, the size and specifications of the building, any upgrades or ongoing construction, and if the property is owned or rented.

There are multiple essential factors that impact the cost of property management liability insurance coverage. 

These items include the number of tenants, square footage leased, company’s history of claims, credit score, and the number of employees working on site.

Each building and property’s specific characteristics may be considered, including buildings registered as historical sites, areas of the building, or property used for particular purposes.

A licensed insurance professional specializing in real estate and property management insurance will provide all the details of what’s required to quote the cost accurately.

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