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When you work as a property manager, it’s important to be prepared for potential risks that could affect your business, from accidental injuries or property damage to lawsuits related to your professional services. Although you likely focus on providing the best possible services, it’s impossible to prevent every adverse event that could cause you financial losses. Securing comprehensive business insurance coverage will help financially protect you from a wide range of hazards.
What insurance coverage do I need as a property manager?
There are many types of insurance coverage to consider, but these policies are particularly relevant to property managers:
General Liability Insurance
General liability insurance covers claims of third-party bodily injury and property damage. As a property manager, if clients or prospective tenants visit your offices, you could be held liable for any injuries or accidents that occur.
Depending on your contract with a building owner, you may also be responsible for accidents that occur on properties you are managing. When you visit properties to supervise maintenance, perform repairs or cleaning, or show vacant units to prospective renters, there’s a possibility that accidental injury or property damage could occur. General liability insurance can provide funds to cover medical costs, damages, and legal fees for claims of unintentional bodily injury or property damage.
General liability insurance also features a personal and advertising injury component that can cover third-party non-physical injuries and reputational damage from libel, slander, copyright infringement, and more. Wrongful eviction is a serious concern for property managers and may be covered under this section of general liability insurance.
Examples:
- Bodily injury: One of your employees mopped a hallway at your offices but forgot to place a wet floor sign. A visiting client slips and falls on the wet floor, breaking his hip. Your general liability insurance would pay for his medical costs as well as legal fees if he sues.
- Property damage: You have to enter a tenant’s apartment while she is out of town because her smoke alarm has low batteries and the low battery alarm noise is disturbing her neighbors. While inside her apartment, you accidentally knock over a table of expensive collectibles, damaging them. Your general liability insurance would cover the damages.
- Wrongful eviction: You’ve recently started managing a property in another county, and you are not as familiar with the county-specific legal procedures for eviction orders. You ask a tenant to leave the apartment you are managing without getting the necessary court order for eviction. The tenant leaves but sues you for wrongful eviction.
Commercial Property Insurance
Commercial property insurance protects the value of your business property, including your office space, computers, equipment, supplies, furniture, and other items. If your property is damaged or destroyed by a covered peril, commercial property insurance will provide funds to replace or repair items. Commonly covered perils include windstorms, hail, fire, vandalism, and water damage.
Commercial property insurance covers the following:
- Buildings belonging to or leased by your company
- Contents of the building, including furniture, equipment, and tools
- Property of others while it is under your care, custody, or control
Example:
- A fire breaks out in your management office after a refrigerator develops an electrical fault. Your commercial property insurance would pay to repair your office and replace damaged items.
Errors and Omissions Insurance
Errors and omissions insurance can provide financial protection if you are sued as a result of alleged failures, negligence, or errors in your professional services. Since property managers take on many responsibilities, there’s a possibility that they could make mistakes that lead to lost income for property owners or lawsuits brought by tenants. Even if you did nothing wrong, you could be sued for a perceived error. E&O insurance can protect you against claims of discrimination against potential renters, failure to hire appropriately licensed contractors or purchase appropriate property insurance, and other claims.
Example:
- You were required to purchase property insurance for a rental home. After the property is severely damaged in a storm, it’s discovered that you had only insured 65% of the property’s value, which means that there is a penalty that reduces the amount of insurance coverage that will be paid out. The property owner sues you for negligence. Your professional liability insurance would cover the lawsuit.
Commercial Crime Insurance
Commercial crime insurance provides protection from financial losses related to crimes such as theft, burglary, robbery, forgery, and fraud. While most commercial property insurance policies do not cover losses from crimes committed by employees and offer limited coverage for losses from crimes committed by other third parties, commercial crime insurance can provide a greater amount of protection from crime-related losses, including those committed by employees. Since property management employees may handle rent payments, purchase items, and hire maintenance and repair services, property management companies have a higher exposure to employee crime.
Example:
- You discover that one of your employees was soliciting additional cash deposit payments from new renters and pocketing the money. Your commercial crime insurance would provide funds for you to reimburse your tenants.
Commercial Auto Insurance
Property managers may drive to various properties for work purposes. If your employees drive company-owned vehicles, you’ll need commercial auto insurance to cover them. If your employees are involved in a car crash, commercial auto insurance can provide coverage for physical damage to vehicles, third-party bodily injury, and property damage.
In some cases, property managers may drive their own personal vehicles to visit properties. It’s important to note that personal auto insurance may not be sufficient if an employee is involved in a collision while driving a personal vehicle for work purposes. You will need to add hired and non-owned auto insurance to protect your company if an employee is at fault in an accident while driving a personal vehicle for work purposes.
Example:
- While on his way from one of your properties to another, one of your employees backs into a neighbor’s fence, knocking it down. Your commercial auto insurance would cover the damages.
Workers’ Compensation Insurance
Almost all states legally require companies that employ people to obtain workers’ compensation coverage. This coverage is particularly important to obtain for property managers who employ maintenance workers, lawn care and landscaping workers, and cleaners, as these physically demanding occupations can lead to a higher chance of workers’ comp claims.
If an employee is injured and is unable to work, workers’ comp can provide funds for the injured employee’s medical treatment, a portion of their lost income, and in some cases, physical rehabilitation expenses. Workers’ comp also provides death benefits for dependents in the case of a work-related employee death.
Example:
- One of your employees falls off a ladder while trimming a hedge and suffers a broken arm. Workers’ compensation would provide funds for the employee’s medical expenses and a portion of lost income during the recovery period.
Bailee’s Customer Insurance
Bailee’s customer insurance protects you if someone else’s property is damaged while it’s in your care, custody, or control. Property managers may be responsible for items belonging to a property owner, such as furnishings, carpeting, draperies, or other items that could be damaged when you perform maintenance. If items are damaged, stolen, or destroyed while in your care, you could be held liable. Bailee’s coverage will cover your business for losses to customers’ property in your control.
Example:
- One of your employees enters a property to perform repairs before it’s rented out. While moving equipment, the employee accidentally stains the unit’s new carpet with grease. Bailee’s insurance would cover the damages.
Additional Coverages
- Business income insurance will reimburse you for lost income and operating expenses if your business is unable to operate temporarily due to a covered reason, such as fire, storm damage, or other property damage.
- A business owner’s policy combines general liability, property, business income, and extra expense coverage into a single package. This type of insurance can help small and midsize property management companies save money on premiums while obtaining a wide range of coverage.
- Cyber liability insurance protects companies from financial losses related to hacking, data breaches, and other cybercrimes. If you handle tenants’ personally identifiable information using online systems, you may need this coverage.
Pricing and Quotes
Pricing for property management business insurance will vary based on the type of insurance coverage and the risk profile of your business. Insurers consider factors such as:
- Business size
- Industry
- Location
- Number of employees
- Claims history
Businesses with higher risks will have higher premiums than those deemed lower risk. For example, a property management business with a history of frequent claims will face higher premiums. Premiums also rise as you increase the limits of insurance. Different insurance companies have different models for rating risks, so it is worth comparing pricing across different insurers.
In order to get an accurate estimate on pricing, it’s best to get a quote from a reputable insurance company. Below we’ve highlighted a few of our trusted partners who offer coverage for property managers:
| Provider | General Liability | Professional Liability | Business Owner's Policy |
|---|---|---|---|
| Embroker | ?? | ?? | ?? |
| CoverageSmith | ?? | ?? | ?? |
| CoverWallet | ?? | ?? | ?? |
| Hiscox | ?? | ?? | ?? |
| Thimble | ?? | ?? | ?? |
Final Word
When you work as a property manager, it’s critical to consider the risks that your business could face and protect yourself against them. No matter how careful you are, there’s always a possibility that unexpected property damage or a claim of a third-party injury will emerge—with potentially disastrous effects for your business. Obtaining a range of business insurance is a critical step that will protect your business from the financial consequences of unforeseen events.
