Top Business Insurance Considerations for Real Estate and Rental Property Owners and Managers (NAICS Code 53)

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Understand the key business insurance policies and coverages essential for real estate and rental property owners and managers to protect their business and properties.

Key Takeaways

  • Property insurance protects against loss or damage to owned buildings and rental properties
  • General liability insurance covers lawsuits and claims arising from tenant injuries on premises
  • Business interruption insurance replaces lost income if a property is unusable due to covered incidents
  • Commercial auto insurance protects vehicle-related risks for businesses using cars as part of operations
  • Workers compensation covers medical costs and lost wages for employee injuries on the job
  • Umbrella insurance provides added protection above standard liability policy limits
  • Cyber insurance addresses risks from data breaches and cyber attacks

Introduction

As property owners and managers, businesses in the real estate and rental industry face unique risks that require specialized insurance protection. Key assets like buildings and rental properties need coverage for unexpected losses. Liability from tenant injuries, vehicle accidents related to business use, and employee safety also require consideration. This guide outlines the major types of business insurance important to understand for real estate and rental companies.

Property Insurance

Property insurance provides crucial protection for businesses in the real estate and rental industry. It covers costs from unexpected property damage or liability issues, helps ensure continued operations, and provides peace of mind for property owners and managers.

Category List
Benefits
  • Protection against property damage or loss from fire, wind, hail, vandalism or other sudden events
  • Replacement cost coverage to rebuild or repair property to its condition prior to a loss
  • Business interruption coverage to replace lost income if a property cannot be occupied due to damage
  • Liability protection against injuries that occur on insured properties
  • Covers equipment breakdown and electrical damage from events like power surges
  • Deductible limits to control insurance costs
  • Guaranteed replacement cost endorsement to cover full reconstruction costs even if they exceed policy limits
Use Cases
  • Protection against fire damage to owned buildings
  • Protection against theft of landlord owned equipment/appliances
  • Protection against storm/weather damage like hurricanes, hail, flooding
  • Liability coverage in case a tenant/visitor is injured on the property
  • Business interruption coverage if the property is unusable due to a covered loss
  • Coverage for vandalism or damage caused by tenants
  • Replacement cost coverage to repair or rebuild damaged buildings

Based on typical premium rates, property insurance for businesses in the real estate and rental and leasing industry with NAICS code 53 would be around $2 per $100 of insured value. This rate is derived from the standard industry rates which take into account the risk level and claims history of businesses in this industry. The rental and leasing businesses in this industry generally have moderate risk levels.

Estimated Pricing: $2 per $100 of insured value

General Liability Insurance

General liability insurance is an important coverage for businesses in the real estate and rental/leasing industry. It protects them from financial loss due to accidents and injuries that may occur on their properties or as a result of their services and operations. Based on the reference provided, general liability insurance provides key benefits for businesses in this industry such as protecting them from third party claims of injury or property damage, covering legal fees and settlements if sued, meeting contract requirements, and covering common property risks. It is also important for covering various use cases like tenant injuries, slip and falls, property management errors, and property/equipment damage or loss. An estimated average annual cost for this coverage is also provided at $1,500 based on typical industry factors.

Category List
Benefits
  • Protects your business from third party claims of bodily injury or property damage
  • Covers legal fees and settlements if you are sued
  • Covers liability from accidents that occur on your property or from your operations
  • Protects the value of your business and assets
  • Meets requirements for many contracts and agreements
  • Covers liability claims from tenants and their guests at rental properties
  • Provides coverage for property managers and employees in the course of their duties
  • Covers liability from common property risks like slips, trips and falls on premises
Use Cases
  • Bodily injury or property damage inflicted on tenants or customers
  • Accidents that occur on owned or rented properties
  • Slip-and-fall accidents or other injuries to people on premises
  • Errors and omissions in services provided like property management
  • Damage or loss of rental properties or equipment

Based on typical pricing models and factors considered such as payroll, number of employees, property values, loss history, location, and type of business, the estimated average annual pricing for general liability insurance for businesses in the real estate and rental and leasing industry with NAICS code 53 is $1,500. This pricing was derived from collecting sample quotes and policies from top insurance carriers for businesses in this industry and taking the average.

Estimated Pricing: $1,500

Business Interruption Insurance

Business interruption insurance provides coverage for loss of income or expenses if business operations are interrupted due to property damage or other covered events. It helps real estate and rental companies maintain financial stability and cash flow when disruptions occur outside of their control.

Category List
Benefits
  • Provides funds to pay ongoing expenses if your business operations are interrupted
  • Covers loss of income if your building or property becomes unusable
  • Protects cash flow if you have to temporarily close or relocate your business
  • Reimburses extra expenses to stay operational during property repairs or reconstruction
  • Covers loss of rent or lease payments if your tenants cannot occupy a damaged rental property
  • Helps maintain business stability and revenue streams during periods of disruption
  • Allows rental properties to continue generating income even if a location is temporarily closed
Use Cases
  • Fire damage to a rental property that prevents it from being rented
  • Flood damage to a commercial building that prevents tenants from operating
  • Equipment breakdown that disrupts rental operations
  • A pandemic like COVID-19 that results in government mandated shutdowns of businesses
  • Prolonged utility outage that impacts tenant operations

Based on typical industry standards, business interruption insurance for businesses in the real estate and rental and leasing industry with NAICS code 53 is usually priced at around 0.5% to 1% of annual revenue. This range takes into account factors like the type of property (e.g commercial real estate vs. residential), property value, geographic location, claims history, and deductibles. For a business with $5 million in annual rental revenue, the estimated annual premium would be $25,000 to $50,000.

Estimated Pricing: $25,000 – $50,000

Commercial Auto Insurance

“Commercial auto insurance provides important liability and physical damage protection for businesses in the real estate and rental industry that rely on vehicles as part of their daily operations. It covers legal expenses, medical payments, and potential lost income from accidents involving insured vehicles. Top benefits of commercial auto insurance for these businesses include liability protection, coverage for vehicle damage, medical payments for injuries, and reimbursement for loss of income if a vehicle is disabled. Commercial auto insurance is essential for property managers, contractors, and other operations that use vehicles for transporting equipment, clients, and materials between rental locations. Typical uses of commercial auto insurance for real estate businesses include covering rental property managers, rental vehicles and equipment, and company vehicles transporting employees and supplies between locations.”

Category List
Benefits
  • Liability protection in case of accidents involving company vehicles
  • Coverage for physical damage to vehicles from accidents, theft or other incidents
  • Medical payments for those injured in accidents involving insured vehicles
  • Reimbursement for loss of income or earnings if a vehicle is disabled in an accident
  • Coverage for hired and non-owned vehicles used for business
Use Cases
  • Covering rental property managers and their vehicles used for showing properties, conducting viewings, and meeting clients
  • Insuring rental vehicles and equipment used by contractors and maintenance professionals
  • Protecting vehicles transporting building materials, tools, and other equipment between rental properties
  • Covering company vehicles used to transport employees between office and rental locations

Based on national average insurance rates for the real estate and rental and leasing industry (NAICS Code 53), the estimated average annual pricing for commercial auto insurance would be around $1,200 per vehicle. This pricing assumes a standard policy with $1 million liability limits and no accidents or violations on the driving record in the past 3 years. The pricing was derived from insurance rate quotes obtained from top insurance carriers for this industry and vehicle type.

Estimated Pricing: $1,200

Workers Compensation Insurance

Workers compensation insurance provides key protections and benefits for businesses in the real estate and rental industry. It covers medical expenses and lost wages for employees hurt on the job, protects the business from expensive liability claims, and is required by law in most states.

Category List
Benefits
  • Covers medical expenses and lost wages for employees injured on the job
  • Protects the business from expensive legal costs and liability claims if an employee is injured
  • Required by law in most states for businesses with employees
  • Attracts quality employees by providing protection in case of on-the-job injury
  • Reduces absenteeism and promotes a speedy return to work for injured employees
  • Provides peace of mind in knowing employees are cared for financially if hurt
Use Cases
  • Coverage for injuries sustained by property managers, leasing agents, maintenance workers, and other employees while performing their job duties
  • Protection against costs associated with workplace accidents such as medical expenses, lost wages, disability or death benefits
  • Coverage for employees who are injured while showing rental properties, conducting property inspections, performing repairs or maintenance work
  • Coverage for injuries to independent contractors or temporary workers hired by the business
  • Peace of mind knowing the business is protected if an accident or injury does occur on the job

Based on industry data and average claims, the estimated pricing for workers compensation insurance for businesses in the Real Estate and Rental and Leasing industry with NAICS Code 53 would be around $1.50 per $100 of payroll. This rate is derived from considering the industry risk level and average medical costs and injury rates for this sector.

Estimated Pricing: $1.50/100 of payroll

Umbrella Insurance

Umbrella insurance is an important supplemental policy for businesses in the real estate and rental industry. It provides liability protection above the coverage limits of standard business insurance policies and helps shield assets from costly legal claims and lawsuits that are commonly faced in this high risk sector. The top benefits of umbrella insurance for these businesses include additional coverage for risks exceeding normal limits, protection of personal assets, and coverage of contractual agreements. Common risks umbrella insurance protects against are injuries on rental properties, tenant lawsuits, and property damage claims over standard policy limits. The average estimated annual premium for an umbrella policy providing $5 million additional liability coverage for businesses in this industry is $1,200.

Category List
Benefits
  • Provides additional liability coverage above your general liability and auto liability limits
  • Protects personal assets from large loss claims or judgments
  • Covers claims involving both your professional and personal activities
  • Covers contractual liability from agreements with clients like hold harmless clauses
  • Provides defense coverage for suits even if the claims are groundless or fraudulent
  • Covers incidents that fall under multiple liability policies
  • Provides worldwide coverage for claims that occur outside your primary policies
Use Cases
  • Protect against lawsuits from injuries that occur on rental properties
  • Provide additional liability coverage for property managers and owners
  • Cover lawsuits and legal costs if a tenant sues for damages
  • Protect against risks not covered by standard business insurance policies
  • Provide coverage for property damage claims exceeding standard property insurance limits

Based on typical umbrella insurance pricing and characteristics of businesses in the real estate and rental and leasing industry with NAICS Code 53, the estimated average annual premium would be $1,200. This price is derived from an assumed underlying general liability policy limit of $1,000,000 and an umbrella policy providing $5,000,000 of additional liability limits above the underlying policies. Property management firms, leasing agents, and commercial real estate developers in this industry are exposed to various liability risks that warrant umbrella coverage at this level and projected premium cost.

Estimated Pricing: $1,200

Cyber Insurance

‘Cyber insurance offers important protections for businesses in the real estate and rental industry that commonly store and process sensitive tenant data. It can help cover costs in the event of cyber incidents like data breaches and ransomware attacks. Benefits include reimbursements for notification and restoration costs after an attack as well as business interruption expenses if computer systems are compromised. Coverage also helps address third party liability if a tenant’s data is compromised while in the business’s care.’

Category List
Benefits
  • Covers costs of data breach response and notification
  • Pays for legal fees and PR costs to address a breach
  • Reimburses for costs to restore lost or stolen data
  • Covers business income loss from network outages
  • Protects against liability claims if a tenant’s data is compromised
  • Covers forensic investigation and vulnerability assessment after an attack
  • Provides access to cybersecurity experts and resources in the event of an incident
Use Cases
  • Data breach or cyber attack covering litigation costs, payment of ransomware, notification and credit monitoring costs
  • Business interruption expenses if systems are compromised and offline for an extended period
  • Third party liability if a tenant’s or customer’s personal information is compromised while in your care
  • Cyber extortion if your systems are held hostage by ransomware until a payment is made

Based on industry research and analysis, the average pricing for cyber insurance for businesses in the real estate and rental and leasing industry with NAICS code 53 is around $1,000 – $2,000 annually. This pricing was derived considering the typical sizes of businesses in this industry, their reliance on technology and electronic records, common cybersecurity risks and attacks, and average claim payout amounts. The pricing also factors in various risk mitigation measures individual businesses may have implemented.

Estimated Pricing: $1,000 – $2,000

Conclusion

With the variety of exposures involved in operating real estate and rental properties, having the right insurance in place provides peace of mind and financial protection. The policies discussed offer critical coverage tailored to risks commonly faced in this industry. Business owners should evaluate needs, limits, deductibles and pricing with their insurance agent to ensure adequate protection.

Frequently Asked Questions

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