If you shop around, you’ll find that many property managers require that the landlords they work for add them to their homeowners insurance as additional insureds. You might wonder why this is since property managers have their own insurance policies, right? While property managers do have their own insurance policies, those policies do not cover the property manager in liability claims relating to their clients’ properties themselves.
Property managers carry professional liability insurance called Errors & Omissions (E&O) Insurance which protects against mistakes a property manager might make while carrying out their specialized management services. This includes claims for invasion of privacy, wrongful eviction, hiring unlicensed contractors, and any other actions related explicitly to property management.
On the other hand, the standard landlord insurance policy protects you, the homeowner, from liability claims relating to your property but does not protect your property manager against those same claims unless you have coverage extended to them. That means that if someone injures themselves on your property, or if there is a burglary or fire, your insurance will defend you against any resulting claims while your property manager will be forced to cover his defense costs personally. Having to pay out of pocket to defend a claim related to your property is not only costly for your property manager, but also to you since most property management contracts have indemnification clauses whereby you agree to indemnify and reimburse your property manager if this occurs. You can avoid these costs by adding your property manager to your insurance policy, so your insurance defends them just as it does you.
How to correctly add your property manager to your policy
When adding your property manager to your policy, the wording is critical. Be aware that if your insurance adds the property manager as “an additional interest,” he will not be covered. Being an additional interest only means the property manager will receive notification of any policy changes or cancellation of coverage so you must make sure your property manager is added as an “additional insured” for coverage to extend to them.
You should also be aware that some insurance companies charge a small fee to add a property manager as an additional insured. Not all do though so it is essential to shop around since it is customary for you, the landlord, to pay this extra fee or find a company that does not require it.
In the end, adding your property manager to your homeowners insurance saves both of you headaches and money. That is why more and more property managers require landlords name them as additional insureds.