Property management insurance

What Type of Property Management Insurance Do I Need?

What Type of Insurance Do I Need for My Property Management Business?

The type of insurance that’s best for your property management business will vary, depending on your needs. Here are three core policies we suggest for property management coverage:

Commercial General Liability Insurance

Commercial general liability (GL) insurance for property managers covers costs associated with incidents like third-party accidents, property damage, and bodily injury to a third party.

Do you really need this type of insurance? The short answer is yes. Without general liability insurance, your business may be responsible for those costs. With the average claim for property damage or accidents for small businesses being $30,000, you’ll want to protect yourself with general liability insurance.

Here’s an example of how general liability insurance works for property managers: While walking through an Airbnb you manage, you accidentally knock over a bottle of red wine that was left by the last visitors. The wine stains the carpet beyond cleaning, and the homeowner sues you for damages.

This situation could go one of two ways: (1) You have to pay all associated costs, including the legal fees, out of your pocket, or (2) you let your property management insurance take over and cover the costs incurred, up to your policy limits, as a result of the incident. The latter sounds a lot less stressful (and less expensive).

So what could general liability insurance cover? Here’s a quick summary:

• Bodily injury
• Third-party property damage
• Personal and advertising injury
• Medical expenses
• And more

General liability insurance usually does not cover:

• Damage to your own property
• Professional services
• Workers compensation or injury to your employees
• Damage to your work
• Expected or intentional injury or damage
• And more

Professional Liability Insurance

As a property manager with various responsibilities, no matter how careful and organized you are, mistakes can happen. For example, what if a tenant requests that you fix her window, but her apartment is broken into before you can fix it?

That’s where professional liability insurance comes in!

Property management liability insurance covers you, your employees, and your business if your client claims that any one of you is negligent in providing your services. Phew! That’s a lot of insurance-speak, so let’s take a look at how PL insurance works in action.

An omission on a lease agreement allows a tenant to live rent-free for months without being evicted. Your client landlord sues you not only for lost revenue but for the legal fees they have had to endure as a result of the situation.

Your professional liability insurance can protect your business’s finances — and your own — if you’re found responsible for any negligence. Since property managers are at risk of being found negligent, this type of insurance is recommended.

Here’s what professional liability may cover:

• Negligence or alleged negligence
• Legal defense costs
• Claims involving libel and/or slander
• Copyright infringement
• Claims and damages
• And more

Professional liability insurance usually does not cover:

• Intentional negligence
• Bodily injury
• Property damage
• False advertising
• Employment matters
• Patents and trade secrets
• And more

Workers Compensation Insurance

For most states, if you have an employee (even if they’re part-time or temporary), you’re required to carry workers compensation insuranc. This insurance protects your business if any of your employees get hurt, injured, or sick while on the job.

If you have employees, the importance of having workers compensation insurance cannot be overstated. In 2018, work injury costs totaled $170.8 billion. Additionally, the average work injury case was roughly $41,000. An expense of that size can be detrimental to a property manager and their business.

Workers compensation insurance for property managers can cover:

• Medical Payments
• Lost Wages
• Rehabilitation Expenses
• Death Benefits

Why Should I Get Insurance for My Property Management Business?

There’s no denying that property management insurance can feel like a major expense, especially if you’re just getting started.

But the reality is that what you spend on property management insurance is a fraction of what you may spend if you are sued by a client (even if you did nothing wrong) or if you accidentally left something critical out of a lease that you prepared. If insurance coverage is required in your state, you could potentially end up in legal trouble if you don’t have the appropriate coverage.

Consider the average costs small business owners are exposed to without insurance:

• $30,000 for property damage or accident claims
• $41,000 for work injury claims
• $50,000 for reputational harm claims (like in cases of slander or libel)
• $20,000 for a customer slip-and-fall case

Lawsuits are common for small business owners, too. In fact, 43% have reported being threatened with or involved in a civil lawsuit.

It’s important to know that you don’t have to do anything wrong to be sued by a client. You could be buttoned up on your end and do a great job, but if a client is upset with you in any way, you may have to hire a lawyer to defend you.

Failing to have the proper insurance coverage could mean having to pay for claims and court fees yourself.

Also, having proof of insurance can help you reach milestones that grow your property management business, like:

• Renting out a room or space for your business
• Convincing property owners to work with you
• Earning clients’ confidence
• Opening another location
• And more!

When you purchase insurance through Simply Business, we’ll provide you with a certificate of insurance (COI), so you can offer proof of coverage immediately.