As a property manager in the real estate industry, there are a lot of risks that come with the job. To mitigate these risks, property managers invest in property management insurance. Not sure if this liability insurance is right for you? Read on to find out exactly who uses this insurance and why property managers should consider it.
What is Property Management Insurance?
Property management insurance is a protection for property management professionals against allegations from clients.
More specifically, this insurance for property managers protects the managers from any claims made by clients like failing to follow the contract or displaying professional negligence. This insurance can cover all claims, no matter how baseless the allegations are.
The reason for having this kind of insurance is that, in the real estate industry, there are dozens of ways that a property manager can have a lawsuit filed against them. Even though most property managers have a lawyer to deal with these problems, this property management insurance pays for all of the legal fees and court fees that come with any lawsuit.
Which property managers should consider property management insurance?
As a general rule, all commercial property managers should consider investing in property management insurance.
More specifically, property managers in the following professions should seriously consider investing in some type of insurance coverage:
- Renting or leasing real estate properties
- Contracting services for some rental property
- Managing any amount of properties
If any of these sound like the profession that you are currently in, you should seriously consider reading the rest of this article to learn more about property management insurance.
What types of insurance for property managers are there?
To protect yourself from any financial risks or lawsuits, it is crucial to have the proper insurance protection in place.
Listed below are the most important types of insurance that you should know about as the owner of a property management company.
General Liability Insurance
The first and most important kind of insurance that most property managers invest in is general liability insurance. Also called business liability insurance, this kind of coverage protects the owner from any kind of claim regarding a bodily injury or personal harm. This kind of insurance is designed to cover things like repairs, replacements, medical bills, and legal fees.
More specifically, this business liability insurance can cover:
- Bodily Injury
- Property Damage
- Advertising Injury
- Copyright Infringement
- Reputational Harm
Although general liability insurance covers a lot for commercial property managers, you should still consider the other kinds of insurance to make sure that every aspect of your business is insured.
Errors and Omissions Insurance
Another kind of insurance that is generally regarded by property managers is errors and omissions insurance, or professional liability insurance. This kind of insurance is designed to protect property managers from lawsuits regarding mistakes made in professional services.
This kind of professional liability insurance is typically reserved for those in the service industry, but it still applies to those who are in the commercial property management business. For example, this insurance covers the legal fees of the property manager if they make some sort of mistake in the contract or if they give false information about something.
More precisely, this professional insurance protects property owners from:
- Errors in the form of service
- Inaccurate advice
Without this insurance, you are open to many financial risks in terms of allegations from clients. These cases can cost thousands of dollars out of your pocket if you don't have the correct insurance to protect you. For this reason, property managers need to seriously consider investing in this coverage.
Tenant Discrimination Insurance
Another form of insurance that is seriously worth considering is tenant discrimination insurance. This is a very dangerous area for property managers as it could lead to some very hefty lawsuits. This kind of business insurance protects against any allegations against property managers regarding wrongful discrimination.
Although this kind of protection may sometimes be covered in your general insurance, it is essential to make sure that you are protected from it in some way.
To be exact, this coverage protects property managers from allegations regarding:
- Sexual orientation
- Wrongful eviction
This insurance pretty much covers any reason that a tenant or prospective tenant could have to claim any sort of unfair action.
Workers' Compensation Insurance
If you are the sole proprietor of your company, you do not really have to worry about obtaining this coverage. However, if you employ any number of people, this is a very important insurance to invest in. In many cases, companies are legally required to obtain this kind of insurance. You may not be legally permitted to hire employees if they are not covered by this business insurance.
Some of the things that are covered by workers' compensation insurance include:
- Employee injuries
- Missed Wages
- Death expenses
- Vocational rehabilitation
If you are not sure about the requirements regarding this coverage, it will be worthwhile to look into your state-specific laws and requirements. Most states have different requirements for this insurance, and it is important to know exactly what your state requires.
Want to find out more about your state's requirements? Visit this website to learn more about the specific rules and regulations per state.
How to choose the best property management insurance
Now that we know all about the different kinds of insurance that exist to protect you and your business, let's talk about how to choose one. In the world of insurance, the number of choices that you have to choose from can become overwhelming. To aid with that, we will discuss below the most important steps to take when choosing your insurance.
Consider your needs
One of the most important steps to take before even beginning the process of finding good insurance is to consider what your business needs the most. It is important to look at your business holistically in order to know which insurance is the priority.
For example, if you run a sole proprietorship, you should not worry about workers' compensation insurance. And if you are a real estate agent, you should not have to worry about property insurance.
When considering your needs, it may also be useful to consider your future needs and think about how your company could change. If you think you may have a use for some type of insurance in the near future, it may be worth investing in it sooner than later.
Search for specialized experience
After confirming the needs of your business, it's time to look at how different companies stack up against each other. In general, it is better to search for companies that specialize in a certain type of insurance, instead of companies that offer various different types.
Unless it is a very well-known company, it is always safer to go with a company that specializes in the kind of insurance that you require. It is important to ask many questions about a company's experience in the field as well as the services that they offer. If it seems like they are designed for another kind of profession, it is better to move on to a different company.
It can also be very helpful to look at online reviews for the provider. If there are a large number of negative reviews regarding that insurance company, it may be worth it to go to a company that has more positive views instead.
Consider the price
As one of the most important deciding factors, the price is something that must be analyzed closely. You should look at the price that you are willing to pay for insurance like this and consider whether or not it is worth it.
The amount of money that you should be spending on property management insurance varies greatly depending on many factors. Some of the most important factors that affect how much you should spend include your company size, revenue, number of clients, and the type of properties you manage.
Putting everything together, a complete insurance policy for your business can run you anywhere from $50 to $100 a month. This is a relatively small price to pay compared to the protections that could possibly come from the coverage.
In conclusion, property management insurance is a very important asset to have for your business, no matter the size. This investment is one that will pay itself back ten-fold and will save you thousands, maybe millions, of dollars during the lifetime of your business. Start searching today to fully insure your most important asset - your business.
P.S. You may also be interested in requiring your tenants to get renters insurance which is another level of protection.