In the real estate world, property managers and landlords face tons of tough and stressful situations.
One of the things that make the job even more difficult is the risk that comes when dealing with virtually anything.
Even sending a notice to a tenant that wasn't worded correctly can really put a dent in your career.
Luckily, there is something out there that can protect any property management business from unprecedented losses or situations.
This is called property management insurance.
Property management insurance is something that every property manager or property management company should consider investing in.
Not sure about what property management insurance is or how it benefits you?
Don't worry, that's what we're here for. In this guide, we will be going over everything about property management insurance, including a general definition as well as all the benefits and costs.
So, to get started, let's go over what property management insurance is.
What is Property Management Insurance?
Although the needs of property managers in terms of insurance differ from person to person, most professionals should consider some type of insurance coverage. The people who should always consider investing in some kind of property management insurance coverage include those who:
- Rent or lease residential real estate
- Manage rental properties
- Contract service for rental properties
This encompasses the majority of property managers and landlords. Lawsuits regarding any of the above services are very common in the industry and are usually very costly. However, the right insurance for property managers can protect clients from risking their biggest assets - their properties.
If you have decided that you will begin to invest in property insurance, it is still important to decide what kind to go with. The kind of insurance that should be invested in depends mostly on what services the landlord or property manager provides.
Below, we have listed the types of property management insurance that exist, along with what they provide.
Types of Property Management Insurance
In this section, we will go over all the types of property management insurance. We will also be providing some insight on who might be interested in that kind of insurance and the cost as well.
General Liability Insurance
The most common type of insurance for property managers is general liability insurance. This kind of insurance is essential for any professional who has any contact with clients.
This insurance protects the property manager from claims against the business regarding someone getting hurt or any property damage. Having a solid general liability insurance policy is essential because of the wide range of things that it protects against. It could protect the owner from something as simple as a new tenant tripping over something on your property.
Since many situations and events, even very small ones, can land the owner a claim, it is important to be protected. General liability coverage even applies to any lawsuits being filed by clients.
Most policies cover a range of things like repairs, replacements, medical bills, legal defense costs, and compensation. These policies can even protect a property manager's reputation. Clients can sue property management companies for speaking badly about them, and general liability insurance can protect the company, or the individual, from dealing with this lawsuit.
Professional Liability Insurance
The next insurance on the list is professional liability insurance, also known as errors and omissions insurance. This kind of insurance protects against claims made regarding the professional service provided to a client. As a professional property manager, clients expect professional service from a point of expertise.
However, if there is a mistake with the services provided, the client can sue. This also applies if something is omitted from any document that costs the client time or money. The worst part is that professional liability claims can be made
This is where errors and omissions coverage comes in. Even if the mistake was not your fault, this insurance coverage pays for any court costs or legal fees that arise from a claim. The insurance agency even provides an attorney and can provide coverage for any damages you may be liable for.
The best part is that this insurance plan also covers errors made in the past. That means that any work that you have done in the past cannot be claimed by a client.
Business Personal Property Insurance
Oftentimes, property managers opt to add business insurance to their general liability insurance package. This kind of insurance covers everything that is within any office building or used by any business. Some of the many things included with this kind of information are:
- Office Supplies
- Heavy Equipment
Basically, it covers everything within a building except for the building itself. This kind of insurance is especially important if you have an office space that is used by multiple people. It is also very important for people who travel a lot or have multiple offices.
Tenant Discrimination Insurance
Next up on the list is tenant discrimination insurance. Tenant discrimination insurance for property managers can be extremely useful for property managers. The reason that it is so important is that some of the claims that can be made in this area are not necessarily covered by general liability packages.
Tenant discrimination insurance can cover a wide range of potential incidents that have to do with race, gender, familial status, or background. Since there are so many scenarios that can count as tenant discrimination, it is important for landlords to be protected from every angle.
This is why many property managers choose to invest in this kind of insurance. Also, tje best part is that these policies typically cover claims from past, present, and prospective tenants. In some cases, tenant discrimination insurance products can even be added to other forms of insurance, like a general liability.
Workers' Compensation Insurance
Workers' compensation insurance is really only important if you employ the services of other people. Meaning, even if you only have one person working for you, workers' compensation is extremely important.
The reason that this insurance is so important to property management businesses is that it protects the owners from any claims made by workers who have suffered any injuries or any discrimination. These claims can cost a lot of money in legal and court fees. Apart from that, they take a lot of time and will hinder productivity for a long period of time.
So, if a business does not invest in compensation insurance, it would have to cover the full cost of any worker's claim. These claims can be extremely expensive, involving a court procedure, hospital bills, and missed wages. With workers' compensation insurance, the business owner does not have to worry about any lawsuits, as they are all covered.
Now that we know about the various kinds of property management insurance, let's go over their approximate costs.
Property Management Insurance Cost
The cost of property management insurance completely depends on a number of factors. Some of these factors include the business's budget, the number of employees, the number of tenants, coverage, property type, and limits.
If you are only interested in the essential coverage, you may just want to go for a general liability package. This insurance will typically cost around $40 per month. However, this only covers basic claims made by clients. Depending on the size of the business, more extensive insurance should be considered.
Furthermore, if you are interested in having more coverage, like adding errors and omissions insurance to the package, the cost goes up. An insurance package containing general liability and professional liability will usually cost around $85 per month.
For companies that employ other people, it is important to add worker's compensation insurance to their policy. Adding this insurance can cost upwards of $120 per month. This means that the typical worker's compensation coverage could cost $40 or more per month. Again, this depends on the size of your business as well as the risk that your employees face.
These are the most common kinds of insurance that property management companies invest in. If you are interested in more extensive forms of insurance, the price will continue increasing. To learn more about how to find property management insurance for your business, check out the blog post we wrote on just that.
In conclusion, property management insurance is extremely important for business owners and property managers to seriously consider. It can save them thousands, maybe even millions, of dollars every year. And it only costs a fraction of what it can save you. So, if you are yet to invest in property management insurance, be sure to look into it and do what's best for your business.