Property management companies managing residential and/or commercial properties are at risk of being sued if something goes wrong on the property they manage.
Property management company insurance is important for anyone who rents or leases real estate for others, who manages another owner’s rental property or who is responsible for contracting and hiring service providers to perform one-time or ongoing services for a rental property. These types of policies may be designed to include various types of insurance coverages, each designed to protect property managers from financial risk.
What Is Property Management Company Insurance?
Property managers should maintain several different types of insurance coverage, including general liability insurance, commercial property insurance, business income coverage (if not included in the commercial property policy) and professional liability insurance. Property management companies should also talk to their insurance professionals about purchasing business auto coverage or equipment breakdown coverage, as needed.
General Liability Coverage
In the event the property management company is found liable for causing someone’s injuries, general liability insurance can cover the financial cost of the claim.
For example, if a resident or visitor slips on an icy sidewalk on the managed property and is hurt, general liability insurance would cover his or her medical expenses. If the injured person brought a lawsuit against the property manager, general liability coverage would also cover the property management company’s defense costs.
Commercial Property Insurance
While the property’s owner must carry insurance on the property itself, those policies typically do not cover the property owner’s own assets. Commercial property insurance for property management companies can be designed to protect the management company against losses sustained because of smoke or fire damage, windstorms, hail, lightning damage, vandalism, theft and more.
Business Income Insurance
If the property owner’s commercial property insurance coverage does not already include protection for business income, this type of insurance coverage should be added.
Also called business interruption insurance, this protection kicks in if another covered loss means repairs are needed before tenants can re-occupy their leased spaces. Business income insurance provides coverage for the lost income during the time period when the property management company isn’t able to collect rent from tenants because of a fire, storm or other covered event.
Professional Liability Insurance
Finally, professional liability coverage – also called errors and omissions (E&O) insurance – can pay for claims or lawsuits alleging that the property management company provided negligent or otherwise inadequate professional services that resulted in harm to a tenant or third-party provider.
Failing to purchase adequate property insurance can lead to an E&O claim, as can evictions that were illegal or otherwise negligent. Tenants or prospective tenants may also claim the property manager discriminated against them, or that the property manager otherwise failed to do something they were contractually or legally obligated to do.
Why Do Property Management Companies Need This Coverage?
Busy property managers have a lot of responsibility for the properties they manage. In addition to attracting and retaining tenants for the leased space, property management companies enter into leases and contracts on behalf of the building’s owner. They are also responsible for maintaining the property and handling routine maintenance tasks when necessary, collecting rents and taking reasonable steps to ensure tenants’ and guests’ safety on the premises.
Any of these activities could give rise to litigation initiated by a tenant, former tenant or third-party service provider. For example, someone who was injured on the premises might claim the property manager was negligent in maintaining the property.
Having the appropriate coverage matters, as most commercial general liability insurance policies limit claims related to professional liability. That’s why adding professional liability coverage is so important. The policy can pay the property manager’s legal expenses and can fund settlements or pay for judgments.
Insure Your Property Management Company
To buy property management company insurance, the first step is to work with an insurance agency or brokerage firm that regularly handles commercial insurance and specialty insurance products.
Follow these tips for buying property management company insurance:
- Ensure coverage levels are adequate to protect your company’s assets and potential liability. Liability risk for a 500-unit residential apartment complex will be significantly higher than for a five-unit building. Residential and commercial rental properties each bring their own set of unique risks to the table. Your insurance professional can help you determine how much coverage you need.
- Ensure your policy covers professional liability. Covering the property itself won’t help you if your business is sued because someone became injured, or if your property management company is charged with libel, slander, discrimination, illegal eviction practices, etc.
- If the property management company uses vehicles for business purposes, make sure you have commercial auto insurance protection.
KORE Insurance Holdings Can Help
Because of the nature of their business, property management companies face unique risks. Properly insuring those risks by purchasing commercial insurance coverage can protect the management company’s assets.
To learn more about property management company insurance, contact KORE Insurance Holdings today online, or call us at (973) 994-3131.