The real estate industry is booming, and property managers play a crucial role in this dynamic ecosystem, keeping investment properties operating like well-oiled machines and thereby maximizing profitability. Of course, with those ups also come the inevitability of risk, whether it be damage, injury, theft or something else. To hedge their bets, property managers must take certain precautions, the most important of which is purchasing the right insurance coverage.
Common Risks Property Managers Face
Maintaining a property involves much more than just collecting rent and scheduling repairs. There’s also the inherent risk of accidents, particularly those involving tenants and/or their guests. As such, a savvy property manager should develop a risk management strategy that addresses all areas of potential exposure. These areas may include, but are not limited to:
- - Damages to building, property or equipment
- - General liability
- - Human injury
- - Liabilities from environmental and other external events
- - Tenant discrimination
- - Wrongful eviction
Types of Insurance for Property Managers
To protect against the many different risks listed above, property management professionals should focus on two specific types of insurance coverage:
General Liability – Depending on the provider, this type of coverage should protect property managers against a variety of different potential claims, such as injuries that occur in the course of business operations.
Errors and Omissions – This type of coverage is designed to protect against losses that may occur due to mistakes made by the property manager. Investopedia lists “claims made by clients for inadequate work or negligent actions” as an example of this.
These are the two basic types of insurance coverage property managers should consider. They are meant to form a foundation of protection against costly claims that could derail a career or company’s success.
It would be a wise idea to consult with an insurance professional to discuss any potential gaps in coverage and other recommended options. This is important, because property managers serve many different roles and perform a variety of duties. Therefore, the coverage needed for each may also vary.
How to Determine Coverage Needs
Before scheduling an appointment with an insurance provider, property managers should assess their own level of risk by asking the following questions:
- - What type of properties do I manage?
- - What is the approximate value of each property I manage?
- - What characteristics do my tenants possess? Are they individuals, companies, public organizations, etc.?
The answers to these questions will help determine the right level of coverage.
There are many benefits to being in the property management industry. Along with those benefits, however, come certain risks. Knowing those risks and purchasing the appropriate insurance coverage can provide protection and prevent costly problems down the road.