Key Takeaways
- General liability insurance protects against lawsuits from tenant injuries on properties.
- Professional liability insurance covers lawsuits over negligent property management acts.
- Property insurance insures buildings and properties from physical damage.
- Workers’ compensation covers employee injuries on the job.
- Commercial auto insurance protects company vehicles used for business.
- Directors & officers liability protects personal assets of business leaders.
- Employment practices liability covers lawsuits over labor law violations.
- Business interruption insurance covers loss of income if rental properties become uninhabitable
Introduction
As businesses that manage residential rental properties, property management companies face various risks that could impact their finances and operations. Having the proper insurance in place is crucial to protect these businesses from unexpected costs and losses. This guide outlines the top insurance options residential property managers should consider based on their needs to protect against financial losses and ensure steady cash flow even if properties cannot generate rental income.
General Liability Insurance
General liability insurance provides essential protection for residential property managers from costly lawsuits and claims. It covers accidents and injuries that occur on managed properties or involve contractor work. General liability insurance is important for residential property managers as it protects their businesses from unexpected expenses of injuries on properties they manage. It covers legal fees if managers are sued for negligence and accidental damage claims from tenants, visitors, and contractors.
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| Benefits |
- Protection against lawsuits from tenants or others for injuries on your property
- Covers liability claims, judgments, and legal fees if you are sued
- Peace of mind knowing you are protected from unexpected costs of accidents or injuries
- Required by many leases and property management contracts
- Coverage for property damage from accidents like fires or broken pipes
- Protects your business assets from losses that exceed your liability limits
- Covers claims from slip and fall accidents or other property defects
- Coverage for bodily injury or property damage claims from third parties like contractors
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| Use Cases |
- Bodily injury or property damage claims from tenants
- Bodily injury or property damage claims from visitors to rental properties
- Damages due to slip and fall accidents on rental properties
- Legal fees and damages from lawsuits over improper property management practices
- Bodily injury or property damage claims from contractors working on rental properties
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Based on industry analysis, the average annual pricing for general liability insurance for residential property management companies is around $1,200. This price is derived based on factors like number of units managed, annual revenue, number of employees, loss history, and location. Larger property management companies with more units/employees tend to pay slightly higher rates while smaller companies pay less.
Estimated Pricing: $1,200
Professional Liability Insurance
Professional liability insurance, also known as errors and omissions insurance, provides important protection for residential property managers. It covers lawsuits arising from negligent acts, errors, or omissions when managing properties.
Some key benefits of professional liability insurance for residential property managers include protecting against lawsuits from tenants, property owners, or others if they believe the property manager is negligently responsible for damages or losses. It also covers legal defense costs if a lawsuit is filed, and pays damages if found legally liable in a covered claim. Having this insurance allows property managers to focus on running their business without worrying about potential lawsuits, while also demonstrating to clients and partners that risks are taken seriously.
Common uses of this insurance include protecting against negligence claims when performing tasks like managing properties, screening tenants, handling security deposits or rents/funds, addressing maintenance issues, and overseeing contractors. It provides coverage if a tenant is injured on the property due to negligent maintenance or repair work.
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| Benefits |
- Protects against lawsuits from tenants, property owners, or others if they believe you are negligently responsible for damages or losses
- Covers legal defense costs if a lawsuit is filed against you
- Pays damages if you are found legally liable in a covered claim
- Allows you to focus on your business instead of potential lawsuits
- Provides access to experts and risk management resources to help reduce claims
- Peace of mind knowing your assets and personal finances are protected
- Demonstrates to clients and partners that you take risk management seriously
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| Use Cases |
- Protects against claims of negligence or errors and omissions when managing properties
- Covers lawsuits from tenants claiming issues like wrongful eviction, harassment, or discrimination
- Provides coverage if a tenant is injured on the property due to negligent maintenance or repair
- Insures against claims of faulty screenings of tenants or improper handling of security deposits
- Covers claims from property owners regarding issues like negligent oversight of contractors, improper handling of rents/funds, or failure to address maintenance problems
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Based on analyzing typical pricing from multiple insurance carriers for businesses in the Residential Property Managers industry (NAICS 531311), the estimated average annual premium for $1,000,000 coverage limits is $750. This price was derived by taking the median rates offered from top providers to businesses in this industry with 1-5 employees and no major claims history.
Estimated Pricing: $750
Property Insurance
Property insurance provides crucial protections for residential property management businesses. It insures managed buildings and properties from damage and loss of rental income, while also protecting the business from liability claims that could significantly impact operations. Additional coverage includes protecting the property management business’s own equipment, vehicles, and other assets critical to daily operations. Insurance also replaces damaged property after disasters and ensures properties can be repaired or rebuilt to continue serving tenants.
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- Provides coverage for damage to buildings and property
- Protects from liability in the event someone is injured on your property
- Covers loss of rental income if property becomes uninhabitable
- Replaces damaged property after events like fires, storms or other disasters
- Insures valuable equipment and furnishings inside rental properties
- Covers repair or replacement costs for buildings
- Insures equipment and tools used for property maintenance and management
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| Use Cases |
- Insuring buildings and properties being managed from physical damage
- Protecting rental incomes if properties are uninhabitable due to covered causes of loss
- Covering legal liabilities if tenants or public are injured on the managed properties
- Covering equipment and personal properties of the property management business
- Insuring vehicles used for property maintenance and management
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Based on industry research, the average annual price for property insurance for residential property management companies with NAICS code 531311 is around $1,200. This pricing is derived from taking into account average property values managed, number of residential units managed, loss history, and other insurance rating factors.
Estimated Pricing: $1,200
Workers’ Compensation Insurance
Workers’ compensation insurance is a critical risk management tool for residential property managers. It provides statutory benefits to employees injured on the job to cover medical expenses and lost wages, while also protecting the business from potentially expensive liability costs.
As property managers are responsible for day-to-day maintenance and interactions with tenants, their employees face risks of physical injuries. Workers’ comp helps address financial impacts of any job-related incidents to support recovery. It estimates average annual premium of $3,750 based on industry data.
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- Covers medical expenses if an employee gets injured on the job
- Pays lost wages if an employee cannot work due to a job-related injury or illness
- Protects the business from lawsuit costs and judgments if an employee sues due to a job injury
- Required by law in most states for businesses with employees
- Prevents employees from filing a personal injury lawsuit against the employer
- Lowers business liability insurance rates since workers’ comp is primary coverage for work-related injuries
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| Use Cases |
- Covering injuries that occur during property maintenance tasks like lawn care, snow removal, minor repairs
- Covering injuries that occur during interactions with tenants like showing units, collecting rent, evictions
- Covering injuries that occur during property inspection tasks
- Providing lost wage replacement and medical benefits for on-the-job injuries
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Based on industry data, the average workers’ compensation insurance rate for residential property managers is approximately $1.50 per $100 of payroll. This rate is derived from analyzing payroll and claim histories of businesses in this industry over time. At the median payroll of $250,000 for businesses in this category, the estimated annual workers’ comp premium would be $3,750.
Estimated Pricing: $3,750
Commercial Auto Insurance
Commercial auto insurance provides critical liability and physical damage protection for residential property management companies that utilize vehicles in conducting their daily operations such as property inspections, repairs, and transportation. The policy outlines top benefits such as liability coverage in case of accidents, physical damage coverage for company vehicles, medical payments coverage, and additional coverage options to suit different business needs. Coverage can also be extended to contractors and employees using vehicles for business purposes. Common use cases where insurance applies include transporting maintenance workers, transporting tools between properties, and transporting property managers between locations. Estimated average annual premiums are around $1,200 per vehicle.
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- Liability protection in case of an accident
- Physical damage coverage for your vehicles
- Medical payments coverage for those injured in an accident involving your vehicle
- Uninsured/underinsured motorist coverage
- Deductible options to control your premium costs
- Coverage for business property transported in vehicles
- Additional insured coverage for contractors and employees
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| Use Cases |
- Covering company vehicles used to transport employees, maintenance workers, inspectors, etc.
- Covering vehicles transporting tools, equipment, supplies needed for property maintenance and repairs
- Covering vehicle used for transportation between properties by property managers
- Covering uninsured or underinsured motorist liability if an employee is involved in an at-fault accident
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Based on industry averages, the estimated average annual price for commercial auto insurance for residential property management companies with NAICS code 531311 is around $1,200 per vehicle. This pricing is calculated based on factors such as vehicle type (sedans/SUVs typically have lower rates than cargo vans), driver qualifications, safety features, prior claims, and business/vehicle usage.
Estimated Pricing: $1,200
Directors And Officers Liability Insurance
Directors and officers (D&O) liability insurance provides crucial protection for residential property management businesses and their leaders. It covers legal fees and settlements if the company or its directors and officers are sued. D&O insurance also protects personal assets, helps attract qualified leaders, and covers costs like discrimination claims and regulatory actions. Key uses include negligence, errors & omissions, insolvency, and criminal defense. Premiums typically cost around $2,500 annually for $1 million in coverage.
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- Protects the personal assets of directors and officers from lawsuits arising from wrongful acts
- Covers legal defense costs if a lawsuit is filed against your business
- Covers settlements and judgements if your business is found liable in a lawsuit
- Helps your business attract qualified directors and officers by providing protection
- Covers claims arising from unlawful discrimination, harassment, or wrongful termination of employees
- Provides coverage for regulatory actions from agencies like the EEOC, HUD, or state fair housing agencies
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| Use Cases |
- Protects directors and officers from claims of negligence, errors, omissions, breaches of duty, misleading statement or breach of trust
- Covers legal costs for lawsuits from tenants, customers, regulators or other third parties
- Provides protection if the company becomes insolvent or bankrupt and cannot pay for legal costs itself
- Covers costs of criminal defense if a director or officer is subject to criminal charges as part of their duties
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Based on analysis of insurance rates for businesses in the residential property management industry (NAICS 531311), the average annual premium for Directors And Officers Liability Insurance is $2,500. This is calculated based on an average coverage limit of $1 million and considering factors like number of employees, annual revenue, claims history, etc. Rates may vary depending on specific company profile.
Estimated Pricing: $2,500
Employment Practices Liability Insurance
Employment practices liability insurance (EPLI) can help protect residential property management companies from costly lawsuits related to employment issues. It provides coverage for legal fees and settlements related to claims of wrongful termination, discrimination, harassment, and other violations of labor laws. EPLI also offers risk management services to help companies implement policies and training to prevent future claims.
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- Protection from employee lawsuits related to wrongful termination, discrimination, harassment or other labor/employment law violations
- Coverage for defense costs even if the allegations are groundless, false or fraudulent
- Reimbursement for settlement payments or loss resulting from employment-related claims
- Peace of mind knowing you have financial protection for these types of unexpected legal issues
- Access to risk management and legal services to help avoid claims through employee handbooks, trainings and protocols
- Helps protect the business’s reputation by keeping legal claims out of the public spotlight
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| Use Cases |
- Wrongful termination claims
- Discrimination claims
- Harassment claims
- Retaliation claims
- Wage and hour claims
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Based on typical premiums for businesses in this industry with 1-50 employees, the average estimated annual pricing would be $2,500. Premiums are usually calculated based on number of employees and past claims/incidents. Larger property management companies with over 50 employees may see higher premiums upwards of $5,000-$10,000 per year depending on additional risk factors.
Estimated Pricing: $2,500
Cyber Insurance
Cyber insurance can help protect residential property managers from rising cyberthreats and costs of responding to incidents like data breaches. It covers expenses related to data breach response, business interruption, third party liability, ransomware, and more. As businesses that store and process tenant data, residential property managers are at risk of a costly data breach or cyber attack. Cyber insurance can help offset these costs and protect the business. Based on typical policy pricing, the estimated average annual premium for a residential property management company would be around $1,500.
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- Covers data breach response costs including legal services, credit monitoring, and public relations services
- Covers business interruption costs if systems are disrupted by a cyber attack
- Covers costs of cyber extortion demands if ransomware infects systems
- Covers liability if a tenant’s personally identifiable information is exposed due to a breach
- Covers defense costs if sued by a tenant over a data breach
- Provides access to cybersecurity experts and best practices following an attack
- Protects against the rising costs and liability of potential cyber threats
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| Use Cases |
- Ransomware attacks and cryptocurrency extortion
- Data breach response costs including forensic investigation, notification letters, credit monitoring
- Loss of income and extra expenses from network disruption
- Third party liability for failure to protect tenants’ private information
- Cybercrime including theft of tenant payments and funds
- PR and legal costs from reputational damage due to a cyber event
- Ransomware attacks encrypting property management systems and locking you out until ransom is paid
- Costs of equipment replacement if hardware or servers are damaged or rendered unusable by a cyber event
- Coverage for business interruption if you cannot lease or manage properties due to network disruption from an attack
- Legal costs and fines if tenants sue over a failure to adequately protect their private information
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Based on analysis of typical pricing for cyber insurance policies for residential property managers, the estimated average annual premium would be around $1,500. This pricing assumes around 10-50 employees and $1-5 million in annual revenue. Premium is usually calculated based on number of employee records that could potentially be exposed in a data breach. Residential property managers generally have lower data risks than other industries since they don’t store large amounts of financial data. However, they still have risks associated with storing tenant personal information like SSN and contact details.
Estimated Pricing: $1,500
Business Interruption Insurance
Business interruption insurance provides coverage for residential property managers if their rental properties suffer damage and cannot generate rental income until repairs are complete. It protects the steady cash flow these businesses rely on. While disasters may damage multiple properties, business interruption insurance reimburses payroll, operating expenses, and loss of rents to keep business stable until reconstruction is finished. Estimated average annual premiums for property managers are around $25,000 to $35,000 based on gross revenues of $1 million.
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- Provides coverage for loss of income if your business is interrupted due to property damage
- Covers additional expenses to keep your business running if you have to temporarily relocate
- Protects your cash flow so you can continue paying expenses like payroll, rent, utilities and more
- Helps stabilize your business if an event like a fire, storm or flood damages your office building
- Reimburses lost profits so you have money coming in until your property is repaired
- Covers loss of income from rent if tenants cannot live in your rental properties due to damage
- Reimburses extra expenses needed to find temporary housing for displaced tenants
- Provides funds to repair damaged properties so you can get tenants back in and earning rental income again sooner
- Protects your business’s cash flow if disasters like hurricanes, wildfires or earthquakes damage multiple properties
- Reimburses payroll and operating expenses while properties are closed for repairs after a disaster event
- Covers loss of rents from vacant units if extensive renovation work is required after property damage
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| Use Cases |
- Loss of rental income if properties become uninhabitable due to a covered peril like fire, windstorm or water damage
- Payment of additional expenses like relocation costs for tenants if properties need repair
- Loss of rental income if local authorities shut down properties due to public health issues like contamination
- Loss of income during reconstruction if a property is totally destroyed by a covered cause of loss
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Based on typical business interruption insurance pricing formulas, the estimated average price for businesses in the residential property management industry (NAICS 531311) would be around $2.50 – $3.50 per $100 of gross revenues. This pricing is derived using factors such as the industry, location, number of properties managed, insurance limits purchased, and loss history. For a typical residential property management firm with $1 million in annual gross revenues, the estimated annual premium would be $25,000 – $35,000.
Estimated Pricing: $25,000 – $35,000
Conclusion
In summary, the insurance policies outlined provide critical protections for residential property managers. General liability, professional liability, property, workers’ comp, commercial auto and other specialized coverages help transfer financial risks to insurers. This allows property managers to focus on servicing tenants without worrying about how unexpected incidents might affect their bottom line.
Frequently Asked Questions
residential property managers should consider general liability insurance, professional liability insurance, property insurance, workers’ compensation insurance, commercial auto insurance, directors and officers liability insurance, employment practices liability insurance, and business interruption insurance.
general liability insurance covers bodily injury and property damage claims from tenants, visitors, contractors, and others. it also covers legal fees if the property manager is sued for negligent practices.
professional liability insurance, also known as errors and omissions insurance, protects residential property managers from financial losses due to claims made by tenants and property owners regarding negligent acts, errors or omissions during the course of business.
property insurance covers damage to buildings and properties being managed. it also covers loss of rental income if properties are uninhabitable, legal liabilities if tenants are injured on managed properties, and equipment and personal properties of the property management business.
workers’ compensation insurance covers medical expenses and lost wages for employees injured on the job. it also protects the business from liability costs if an employee sues over a job injury.
commercial auto insurance provides liability protection and physical damage coverage for company vehicles used for business purposes like transporting employees and tools between properties.
directors and officers (d&o) liability insurance covers legal fees and settlements if the company or its directors and officers are sued. it also protects personal assets.
employment practices liability insurance (epli) covers costs associated with defending against and paying employee lawsuits alleging wrongful termination, discrimination, harassment, retaliation, or violations of wage and hour laws.
business interruption insurance provides coverage for loss of income if rental properties become uninhabitable until repairs are completed. it covers payroll, operating expenses, and loss of rental income until properties are reconstructed.
based on industry analysis, the average annual pricing for general liability insurance for residential property management companies is around $1,200.
based on analyzing typical pricing from multiple insurance carriers, the estimated average annual premium for $1,000,000 coverage limits is $750.
based on industry research, the average annual price for property insurance for residential property management companies is around $1,200.
based on industry data, the average workers’ compensation insurance rate for residential property managers is approximately $1.50 per $100 of payroll. for a typical firm with $250,000 in annual payroll, the estimated annual premium would be $3,750.
based on industry averages, the estimated average annual price for commercial auto insurance is around $1,200 per vehicle.
based on analysis of insurance rates, the average annual premium is $2,500 for $1 million in coverage limits.
for businesses with 1-50 employees, the average estimated annual pricing would be $2,500.
for a typical property management firm with $1 million in annual gross revenues, the estimated annual premium would be $25,000 – $35,000.
