The Top 8 Business Insurance Policies for Property Managers of Residential Rental Properties (NAICS 531110)

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As property managers and landlords, businesses that oversee residential rental properties face a variety of risks that could have significant financial impact. This guide outlines the top 8 business insurance policies that are essential to protect the financial well-being of the business and properties from unexpected losses.

Key Takeaways

  • General liability insurance protects against tenant lawsuits over injuries on the property.
  • Property insurance covers repair costs due to disasters like fire or water damage.
  • Workers’ compensation covers medical costs if an employee gets injured on the job.
  • Commercial auto covers vehicles used to transport staff and rental property supplies.
  • Commercial umbrella provides additional liability protection above primary policies.
  • Directors & officers protects personal assets if sued for wrongful acts as directors.
  • Commercial crime covers losses from employee theft, tenant fraud, and robbery.
  • Equipment breakdown insures against repair costs if rental property equipment fails.

Introduction

As property managers and landlords, businesses that oversee residential rental properties face a variety of risks that could have significant financial impact. This guide outlines the top 8 business insurance policies that are essential to protect the financial well-being of the business and properties from unexpected losses.

General Liability Insurance

General liability insurance is an important type of coverage for property managers and landlords to protect their business from expensive lawsuits. It covers bodily injury, property damage, and legal defense costs that may occur on rental properties. The top benefits of general liability insurance for lessors of residential buildings include protecting against tenant lawsuits over injuries, covering legal fees and settlements from negligence claims, and protecting business assets from losses in lawsuits. It also covers slip and fall accidents, third party injuries, and neighbor disputes. The key use cases where general liability insurance applies include tenant injuries, maintenance injuries, slip and fall lawsuits, tenant property damage, vehicle liability, visitor injuries, tenant damage, and legal defense costs. The estimated average annual cost for general liability insurance for businesses in this industry is $1,200, based on factors like number of units, revenue, and location.

Category List
Benefits
  • Protects against lawsuits from tenants for injuries on your property
  • Covers legal fees and settlements if a tenant sues for negligence
  • Protects your assets like buildings and bank accounts if you lose a lawsuit
  • Covers lawsuits related to slip and fall accidents on your property
  • Covers bodily injury or property damage claims from third parties like delivery people or repair workers
  • Provides defense coverage if you are sued, even for frivolous claims
  • Covers lawsuits from neighbors for issues like noisy tenants or parking disputes
Use Cases
  • Bodily injury or property damage that occur on rental property
  • Bodily injury or property damage that occur during maintenance or repairs
  • Lawsuits from tenants for slip and fall or other accidents on property
  • Damage to a tenant’s personal property
  • Liability from operating vehicles for the business
  • Lawsuits from others injured on the property such as delivery drivers or visitors
  • Property damage caused by tenants
  • Legal defense expenses if sued

Based on industry research and analysis, the estimated average annual pricing for general liability insurance for businesses in the lessors of residential buildings and dwellings with NAICS code 531110 is $1,200. This pricing was derived from analyzing insurance quotes from multiple carriers for businesses in this industry with 1-4 residential units and no major claims in the past 3 years. The pricing takes into account factors like number of units managed, business revenue, and geographic location (urban vs. rural).

Estimated Pricing: $1,200

Property Insurance

Property insurance provides critical protection for businesses that own and rent residential properties from unforeseen financial losses. It covers repair costs, liability claims, lost income and more to keep the business operating smoothly when disasters strike. Here are some key benefits and use cases of property insurance for lessors of residential buildings:
– Covers costs to repair fire damage, burst pipes, wind damage and more
– Provides liability protection if a tenant is injured on the property
– Ensures income continues by covering loss of rent if a property becomes unlivable
– Replaces damaged properties to get them rented again as quickly as possible

Category List
Benefits
  • Covers repair or replacement costs due to fire, smoke, lightning, wind, hail, explosion or falling objects
  • Protects against water or sewer backup and damage from vehicle collisions
  • Covers costs to temporarily relocate tenants due to covered perils
  • Covers repair costs due to burst pipes, leaks or overflow from plumbing system or household appliances
  • Covers loss of rents or income if the property is uninhabitable due to a covered loss
  • Provides liability protection if a tenant or third party is injured on the property
  • Covers damage to building structure including walls, floors and ceilings
Use Cases
  • Protection against property damage from fire, wind, hail or other disasters
  • Liability coverage in case a resident is injured on the property
  • Loss of rent and additional living expenses if the property is uninhabitable due to covered damage
  • Replacement cost coverage to repair or rebuild damaged properties
  • Lost rent payment if property becomes uninhabitable during renovations

Based on industry analysis and averages, the estimated average annual pricing for property insurance for businesses in the Lessors of Residential Buildings and Dwellings NAICS 531110 industry would be around $0.75-$1 per square foot of total property size. This pricing is derived from considering typical property values, replacement costs, liability exposures, claims history for the industry, and average insurance rates for properties of similar risk profiles.

Estimated Pricing: $0.75-$1/sqft

Worker’S Compensation Insurance

Worker’s compensation insurance provides important protections for businesses that employ individuals to maintain, manage and oversee residential rental properties. It ensures medical costs and lost wages are covered if employees are injured on the job, helping businesses remain compliant with state regulations while supporting injured workers’ recovery. Common employees that would be covered include maintenance workers who perform repairs, landscapers, rental office staff, contracted or temporary workers, and others who interact with tenants and properties. The coverage also provides wage replacement and medical benefits to assist injured employees with expenses. Based on average risk factors and injury rates for this industry, the estimated annual pricing for worker’s compensation insurance would be around $1.50 per $100 of payroll. This rate is derived considering factors like injury rates for office/clerical workers, lower physical risks compared to construction or manufacturing industries, and average benefits paid historically. Broker commissions may increase the effective rate by 5-10%.

Category List
Benefits
  • Covers medical expenses and lost wages for employees injured on the job
  • Protects your business from costly legal fees and lawsuits related to on-the-job injuries
  • Required by law in most states
  • Provides disability benefits if an employee cannot work due to job-related injury or illness
  • Reduces absenteeism and promotes a speedy return to work for injured employees
  • Lowers other insurance costs through negotiated provider discounts
  • Helps ensure compliance with state laws for employers
Use Cases
  • Covering maintenance and repair employees who work on residential properties
  • Covering rental office staff who interact with tenants and handle administrative tasks
  • Covering damage or injuries that occur on rental properties
  • Covering contracted or temporary workers hired to assist with projects
  • Providing wage replacement benefits and medical coverage if an employee is injured at work

Based on average risk factors and injury rates for this industry, the estimated annual pricing for worker’s compensation insurance would be around $1.50 per $100 of payroll. This rate is derived considering factors like injury rates for office/clerical workers, lower physical risks compared to construction or manufacturing industries, and average benefits paid historically. Broker commissions may increase the effective rate by 5-10%.

Estimated Pricing: $1.50 per $100 of payroll

Commercial Auto Insurance

Commercial auto insurance provides essential protection for businesses in the residential property leasing industry by covering vehicles used to transport staff and supplies as well as potential liability from accidents. It also estimates the average annual cost for commercial auto insurance would be around $900 for 1-2 light duty vehicles with low annual mileage used mainly locally.

Category List
Benefits
  • Liability protection in case of accidents
  • Coverage for physical damage to vehicles
  • Medical payments for those injured in an accident
  • Replacement or repair costs if a vehicle is damaged
  • Rental car reimbursement when a vehicle is in the shop for repairs
  • Coverage for additional insured such as property owners or landlords
Use Cases
  • Cover vehicles used to transport rental property maintenance staff and supplies
  • Cover vehicles used to transport rental property tenants

Based on average vehicle use and risk profiles of businesses in the lessors of residential real estate industry, the estimated average annual commercial auto insurance pricing would be around $900. This price takes into account factors like 1-2 light duty vehicles used for property maintenance and minimal commercial passenger transportation. The vehicles likely have low annual mileage and are used mainly in local areas with minimal long distance traveling.

Estimated Pricing: $900

Commercial Umbrella Insurance

Commercial umbrella insurance provides additional liability protection above a business’s primary insurance policies. It helps protect assets and ensures adequate financial coverage is in place should unexpected lawsuits or costly claims arise.

Umbrella insurance is particularly beneficial for businesses in the residential property leasing industry. As landlords and property managers, they face risks of tenants or others being injured and filing liability lawsuits. Umbrella insurance provides crucial coverage for these types of high impact risks. It also protects personal assets of property owners and managers. Umbrella coverage offers comprehensive protection and peace of mind against the financial risks these businesses may encounter.

Category List
Benefits
  • Provides additional liability protection above the limits of the primary insurance policies
  • Covers losses that may not be covered by underlying policies like employee lawsuits or certain types of pollution claims
  • Protects personal assets from claims that exceed primary insurance coverage limits
  • Offers liability protection against multiple claims that may exceed the limits of the primary policies
  • Provides cost effective way to obtain higher liability limits compared to increasing individual policy limits
  • Protects business continuity and prevents losses from depleting business assets and capital
  • Reduces financial risk and enhances financial stability
  • Improves insurability and helps maintain favorable business terms from lenders and partners
Use Cases
  • Protection from high liability claims or lawsuits that exceed the limits of the underlying commercial general liability (CGL) policy
  • Coverage for personal and advertising injury liability such as if tenants file a lawsuit for libel or slander
  • Defense costs if a lawsuit or claim is filed, in addition to the policy limits of the primary CGL
  • Additional protection for property managers and owners against lawsuits from tenants over injuries or issues at rental properties
  • Peace of mind knowing an adequate amount of liability coverage is in place should an unexpected serious claim or lawsuit arise

Based on the risk profile and typical liability exposures for businesses in the lessors of residential buildings and dwellings industry, the estimated average annual pricing for commercial umbrella insurance would be between $1,000 to $2,000. This pricing was derived based on an assumed underlying general liability policy limit of $1M and umbrella policy limit of $2M. Factors such as number of units leased, claims history, and safety practices would impact the final pricing.

Estimated Pricing: $1,500

Directors And Officers Liability Insurance

Directors and officers liability insurance (D&O insurance) is an important coverage for businesses in the lessors of residential buildings and dwellings industry to protect themselves from lawsuits. D&O insurance provides key benefits like protecting personal assets of directors and officers if they are sued, reimbursing legal defense costs, and assisting with crisis management. It also helps address common issues and claims facing residential real estate lessors like tenant disputes, property damage claims, and other lawsuits that could arise. An estimated average annual premium for D&O insurance for businesses in this industry is around $2,500.

Category List
Benefits
  • Protects directors and officers from personal liability in the event of lawsuits
  • Covers lawsuits alleging wrongful acts, errors, omissions or negligent acts
  • Reimburses legal defense costs if allegations are groundless, false or fraudulent
  • Covers costs associated with defending lawsuits, even if the allegations end up being unfounded
  • Provides crisis management services to help properly respond to lawsuits and minimize damage
  • Protects the company’s reputation by responding to allegations appropriately with crisis management guidance
Use Cases
  • Protection against lawsuits from tenants, shareholders or regulators
  • Reimbursement of legal defense costs if a suit is brought against directors or officers
  • Indemnification if a financial judgement or settlement must be paid resulting from a lawsuit
  • Defense against employment claims such as wrongful termination, harassment, or discrimination
  • Protection for property management errors and omissions such as wrongful evictions, failure to maintain property, or contract disputes

Based on typical industry averages, the estimated average annual premium for Directors And Officers Liability Insurance for businesses in the Lessors of Residential Buildings and Dwellings industry with NAICS Code 531110 is around $2,500. This price was derived from analyzing insurance quotes and policies from several leading carriers for businesses in this industry with 1-50 employees and $1-5M in annual revenues.

Estimated Pricing: $2,500

Commercial Crime Insurance

Commercial crime insurance provides valuable protection for businesses in the residential property leasing industry against risks of theft, fraud, and other criminal acts by employees and tenants. It reimburses losses and includes services to help prevent future crimes. Businesses in this industry often deal with large amounts of cash from rental payments and personal tenant information, so they could benefit from commercial crime insurance coverage of employee theft, tenant fraud, robbery during night deposit drops, and other risks outlined in the reference.

Category List
Benefits
  • Protects against employee theft
  • Covers theft of money and securities
  • Reimburses for losses from cyber fraud or embezzlement
  • Covers losses from tenant fraud like rental application fraud
  • Includes coverage for mysterious disappearance of money or securities
  • Provides access to risk management and fraud prevention services
Use Cases
  • Employee theft or dishonesty
  • Tenant theft from vacant units
  • Fraudulent rental applications
  • Forgery or alteration of checks
  • Robbery during night deposit drops

Based on typical coverage levels for the industry and loss history, commercial crime insurance for landlords with NAICS code 531110 would be estimated around $0.50 per $100 of revenues. This pricing is derived from considering $500,000 of employee dishonesty and forgery/alteration coverage combined with $100,000 of theft, disappearance and destruction coverage. Loss ratios in the industry have historically been around 0.2%.

Estimated Pricing: $0.50 per $100 of revenues

Equipment Breakdown Insurance

Equipment breakdown insurance provides essential protection for businesses that own and operate mechanical equipment vital to maintaining rental properties. It covers repair or replacement costs, lost rental income, liability claims, temporary equipment costs, and food spoilage that may arise from failures or breakdown of key equipment like elevators, HVAC systems, appliances and more. The policy protects companies in the residential rental industry from unexpected costs from equipment issues.

Category List
Benefits
  • Covers repair or replacement costs of mechanical and electrical equipment due to breakdown
  • Covers property damage and time element losses such as lost income or extra expenses during equipment repairs
  • Covers increased costs of operating temporary equipment while repairs are taking place
  • Covers liability claims from property damage or bodily injury resulting from an equipment breakdown
  • Provides food spoilage coverage if a refrigerator or freezer breaks down
  • Includes security against data loss if computer systems are damaged in an equipment breakdown
Use Cases
  • Protect against losses from mechanical and electrical breakdown of equipment used in residential properties like elevators, HVAC systems, security systems
  • Cover losses from failures of built-in appliances like stoves, refrigerators, washer and dryers in rental units
  • Provide reimbursement for costs of repairs or replacement of damaged equipment
  • Pay for losses from equipment failures caused by events like power surges, operator error, freezing weather
  • Cover costs of hiring temporary equipment like generators if primary equipment fails
  • Reimburse lost rental income during periods where a property is uninhabitable due to equipment breakdown

Based on industry data, the average equipment breakdown insurance pricing for businesses in the Lessors of Residential Buildings and Dwellings with NAICS Code 531110 industry is around $0.80 per $100 of insured value. This price is calculated based on the typical equipment in these businesses such as HVAC systems, elevators, appliances, etc. The insured value is usually based on the replacement cost of covered equipment.

Estimated Pricing: $0.80/$100

Cyber Liability Insurance

“Cyber liability insurance is an important consideration for lessors of residential properties who store and process tenant data. It can help protect against costly risks like data breaches and network security incidents.”

Category List
Benefits
  • Covers costs of notifying tenants of a data breach
  • Pays for legal fees and costs to defend a lawsuit brought by tenants due to a data breach
  • Covers amounts paid to settle lawsuits brought by tenants due to a data breach
  • Covers costs associated with restoring, recreating or recollecting lost or altered digital files, programs or other software
  • Covers costs of credit monitoring and identity theft protection services provided to tenants impacted by a data breach
  • Covers loss of business income or extra expenses incurred due to a network security breach
  • Covers costs to repair or replace electronic systems and recover or restore lost data in the event of a cyber attack
  • Covers PR and crisis management expenses for restoring your company’s reputation in the event of a major data breach
Use Cases
  • Data breach or cyber attack leading to loss or theft of tenant or property data
  • Ransomware attack or malware infection requiring ransom payment or remediation costs
  • Legal costs and fines from a data breach investigation or litigation by affected individuals or government entities
  • Business interruption costs from network downtime caused by a cyber attack or security incident

Based on research of typical cyber liability insurance pricing for businesses in the Lessors of Residential Buildings and Dwellings industry with NAICS code 531110, the estimated average annual premium would be around $1,000. This pricing is derived from average premiums paid by similarly sized property management companies handling personal information but with relatively low technology usage and risk exposure.

Estimated Pricing: $1,000

Conclusion

Maintaining adequate insurance coverage helps ensure property management businesses can remain resilient in the face of unforeseen incidents or claims. The right mix of policies goes a long way in safeguarding assets, employees, tenants and the overall profitability and continuity of operations.

Frequently Asked Questions

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