What are the Types of Insurance That a Property Management Company Needs?
Should Property Managers Require Renter’s Insurance?
How to Choose the Best Insurance for Property Managers
How Much Does Property Management Insurance Cost?
Examples of Property Management Insurance Coverage Claims
How Second Nature Helps with Your Resident’s Insurance Coverage
A study by Orchid on property manager insurance found that while 80-90% of property managers require residents to carry insurance, only about 41% of residents actually have or retain that required coverage.
Kind of crazy, right? Especially when you consider that that gap represents a huge exposure to risk for both the property manager and their investor.
Insurance for property management is a must – it protects not just you but your investor’s assets and your resident’s safety. At Second Nature, insurance is so important to us that we wrap an insurance product into our resident benefits package.
So, today, we’re looking at property manager insurance requirements and why it’s so important to get into the nitty-gritty details.
Key Learning Objectives:
Property management business insurance is protection for property managers against the risk of damages or claims against you from residents or clients.
In other words, property management business insurance ensures that you, as the professional property manager, are covered in the case of liability claims, legal proceedings, or losses from perils like fire, vandalism, or burglary.
Property management business insurance can also include tenant liability insurance, or your leases may require that renters are insured in some form. We’ll talk more about tenant liability insurance below.
Property managers are responsible for a lot. Managing people’s homes means that property managers take on considerable liability risks. Claims of injury or property damage can lead to serious financial losses if you aren’t protected.
Property management liability insurance coverage reduces that risk exposure and keeps you from paying out the cost of wrongful eviction claims, injuries, property damage, etc.
In a perfect world, there would be zero property management requirements. We talk a lot about the Triple Win and how property managers should aim to build services and products that delight residents, protect investors, and retain talent on their teams. But even with the best service, everyone inevitably hits some speed bumps. Maybe a resident isn’t happy with an eviction notice, a maintenance item slipped through the cracks, or a property simply got unavoidable damage.
Property management company insurance ensures you’re not liable for the costs of these inevitable parts of life.
At Second Nature, we’ve worked with professional property managers across the country and seen several different approaches to insurance.
But no matter where you manage property, there are some standard types of insurance that property managers should buy or require.
Here are some of the basics.
General liability insurance for property managers covers physical risks for which you might become financially liable. It will typically help cover repairs, replacements, legal fees, and medical bills. You can get it for residential or commercial property.
Property manager liability insurance can include coverage for claims like:
Known as both professional liability insurance or E&O insurance, this type of property management insurance protects Property Management companies (PMCs) from claims about mistakes in their professional services.
Errors and omissions insurance willy typically cover legal fees if there was a mistake in a contract or if there were any – well – damaging errors or omissions in any communication. It may also cover errors in service, omissions in information, negligence, or even inaccurate advice.
Like with any insurance, ideally, you’ll never need this! However, it is best to protect your company from such financial risks if any of your clients decide to make a case against you.
Cyber liability insurance helps protect you from financial losses due to cyberattacks or data breaches.
Cybersecurity is a top focus of business leaders for 2024 and should also be a strong consideration for property management leaders. PMCs handle sensitive personal data from both residents and clients.
Should your company ever experience a data breach, fraud, or other cybersecurity threats, this insurance will help recoup your losses.
Every business with employees – whether it’s one or many – needs worker’s compensation insurance. Worker’s comp covers the costs of employee injury while at work. It also can protect business owners from employee injury lawsuits.
Even sole proprietors may use worker’s comp insurance to cover work injury costs that health insurance might not cover.
In most states, businesses without worker’s compensation insurance will be fined. Be sure to know your state’s laws.
Deposits and damage coverage is a payment the resident submits up-front to be given back at the end of a lease, assuming they haven’t damaged the property.
There’s a lot of innovation in this space, with new products and services providing security deposit alternatives. Many of these are pure insurance, covering damages for a monthly fee.
Vacation rental owners’ insurance covers the investor for any vacation rental property they own. This coverage protects against losses in case of robbery, fire, vandalization, or other damages, whether the building is vacant or occupied.
While property owners should have their own policy, sometimes property managers can extend coverage for some losses as part of their license.
While we don’t know any property managers in our network who would intentionally discriminate against residents, it’s smart to have this type of insurance as well.
Discrimination based on sex, race, religion, ethnicity, age, sexual orientation, disability, etc., is illegal. But that doesn’t mean you’re automatically protected from a discrimination suit. This type of insurance can protect you in case a disgruntled former resident attempts to sue, no matter how baseless the allegations are.
Tenant discrimination claims can lead to serious financial risk and expensive lawsuits. Coverage for such claims are generally excluded from General Liability policies. Be sure to review your existing policy to determine your exposure and add additional coverage as needed.
Renter’s insurance – or H04 insurance – is essentially a financial safety net for residents and their belongings. Renter’s insurance should include three distinct types of coverage:
We recommend residents seek contents and belongings coverage that provides replacement cost value (RCV) rather than actual cash value (ACV), as ACV may not offer sufficient coverage.
For example, if you have a 10-year-old laptop that gets damaged, ACV would only cover the value of your 10-year-old laptop at the time of the damage. RCV would cover the value of replacing it with a new laptop of a similar kind and quality.
Do property managers need to require their residents to carry renter’s insurance, or in the least, tenant liability insurance? Most professional PMs would say absolutely yes. Remember, 80-90% say they require their residents to carry insurance coverage.
So, why do only 41% of residents retain that coverage? Often it’s simply a matter of insurance lapsing without anyone noticing. Or a resident might submit paperwork that’s out of date or decide to end their policy without thinking they need to let you know.
Whatever the reason, it’s important to have a backup plan. If a resident’s insurance lapses, you could be liable for damage during that time.
At Second Nature, we provide tenant liability insurance as part of our Resident Benefits Package (RBP). This feature allows property managers to offer price-competitive insurance coverage that applies to all residents with one basic group rate.
We’ve seen 100% insurance compliance among property managers using our RBP.
As you choose your property managers' insurance plan, it’s important to consider the risks you want covered and any liabilities you might face. Here are a few best practices for selecting a property management business insurance plan.
What is your property management business niche? What kind of properties do you manage? What is their value? What risks or liabilities are you most concerned about? Do you have employees, or are you a sole proprietor?
It’s also important to consider your goals and how your business services and objectives might change over the coming year. If you need a new type of insurance soon, include that consideration in your search.
Get a good idea of what’s on the market and how much it costs. Consider the level of coverage you need vs. what you feel you can afford. Make sure you’re building those insurance fees and deductibles into your pricing structure.
Some insurance companies focus on offering several types of insurance, while others dial down into a specialty. Often, just like with property management, going with the specialist vendor will ensure better coverage and service, however, it may also cost more.
This is where your network really becomes useful. The SFR property management community is an open, generous group of folks. Most will be more than willing to share their insurance experiences, what has worked, what hasn’t, and their favorite vendors.
Ask around within your network for advice. Also, make sure to read reviews of any potential insurance companies and see if they have property management clients.
Of course, this is probably the most important practice. Never make any insurance decisions without discussing them with your attorney! They will be best able to help you navigate legal requirements, your greatest risks and liabilities, and what type of coverage makes the most sense for your PMC.
Explore our resident benefits package, which includes renters insurance.
The cost of property management insurance will fluctuate based on what you decide you need. Your level of risk also affects the cost of insurance.
Insureon gives several estimates of standard costs for property management and real estate insurance. The following average prices are based on Insureon’s customers’ policies, subject to change at any time:
The average prices listed above will vary based on the PMC, properties covered, and the type of coverage and limits requested. Again, property managers should consider which type of coverage they need and then build those costs into their pricing structure.
Let’s look at a few examples of common property manager insurance coverage claims. How does insurance help when you face a crisis like damage, injury, or a lawsuit? Here are a few examples of common types of claims.
That’s one no property manager wants to see! But it takes just one disgruntled former resident to bring a wrongful eviction suit against a PMC – even if the claim is unreasonable.
An example of this could be a resident approved with excellent references, but after move-in, begins disturbing the peace in the neighborhood. Maybe they get noise complaints late into the night or transgress community guidelines. Another example would be a resident who is not making rent payments on time.
In those cases, the property manager would then deliver formal notice of the problem and take the proper steps to legally evict the resident if necessary and allowed by law. It’s still possible that the resident could sue for wrongful eviction.
However, as long as you document your process clearly with your attorney, and follow all legal requirements, your insurance should cover the costs that may result from the lawsuit if such coverage is included within your policy.
Here’s a good example of coverage for loss of rental income:
Our built-in tenant liability insurance plan provides coverage to a PMC in the event one of their properties is unrentable due to a covered loss caused by a resident.
For example, if a property that is covered by our plan is damaged due to a fire caused by the resident and the PMC is unable to rent that property out for a few weeks, they can file a claim under the Loss of Use endorsement and receive up to $1k.
Property damage could be covered differently based on the type of coverage – either by the renter’s insurance, the PMC’s, or the investors’ general liability insurance.
So, here’s a real-life example from one of Second Nature’s partners:
A resident went out of town, and when he returned after two days, he found that the back sliding door with two glass panels was cracked on one side. It’s tempered glass, so the PM didn’t know if it was from heat, intentional damage, or something else. In this case, if the damage were caused by a covered peril (fire, smoke, water, explosion, collapse, etc.) or resident negligence, the PM’s master insurance obtained through our offering would help cover the cost.
An investor’s property insurance should also cover property damage for the same causes.
Pet liability insurance helps cover any damage done by pets to the property – or injury caused by the pet to anyone else.
Under our tenant liability insurance benefit, pet damages and dog bites are covered up to $25k. We have one of the only insurance policies that cover any dog breed as long as the property manager approves the dog.
Animal liability covers the cost of any suits filed and medical expenses up to the policy’s limit.
At Second Nature, we know how valuable your investors’ assets are – and how much risk you take on as a property manager. While insurance can sometimes feel like a zero-sum game, we aim to make every opportunity a win for everyone involved.
That’s where our tenant liability insurance product comes in. We offer PMCs a fully managed tenant liability insurance plan that helps ensure compliance and that you, your investor, and your residents can rest easy knowing you’re covered for damage or harm.
With our tenant’s liability insurance, we’ve seen our partner PMCs go from:
Derrick Scott, from IMG put it this way: “I don’t know if people grasp just how important the ‘fully managed’ part of that is. We’ve seen property managers whose residents’ insurance lapsed, but no one knew about it. Unfortunately, the resident had a claim during the three-month period they didn’t have insurance. So the property manager took on that liability.
“Being fully managed means transferring some of that liability to get that done – and ensuring you have coverage. I see that as a massive benefit.”
Every property manager knows insurance matters, but that doesn’t make it any less of a headache. If you want to learn more about how we can partner with you to make that part of your life simpler, check out the details on our Resident Benefits Package.
Keep learning
Every property manager wants to minimize days on the market, and a great listing can be a critical component of accomplishing that goal. If you've spent any time looking at real estate listings, whether rentals or not, you've no doubt seen some well-done ones and ones that have five photos, three of which appear to have been taken for the TV show Hoarders. What makes a listing strong? If you're asking this question, you're off to a good start, and you're in the right place. Be thorough but concise Your listing should strike a balance between being thorough and concise, but it’s important to never leave out critical information that could lead to a negative experience down the road. First and foremost are any upfront fees, then things like pet rules, HOA considerations, and other relevancies that you don’t want a prospective resident to learn about later after they’re further into the process. Be concise about these so your property description doesn’t become too long, but be sure to include what a renter needs to know regarding costs in the application and move-in process. Take quality photos Photos are the golden goose when it comes to property listings. Quality, considerate photography will create stronger first impressions from potential renters. Fortunately, getting quality photos isn’t super difficult, it just takes some planning and forethought. You don’t need to stage your property. In fact, many property managers outright recommend against it. Photos of vacant, clean rooms are usually the way to go. They allow prospective renters to view their stuff and their layout in the photos, which can make them feel less like they’re looking at someone else’s home. Vacant rooms also tend to look bigger, and low angles with wide-angle lenses can add to this effect while showing the whole room. Cleanliness is next to godliness. Never post pictures with boxes, garbage around, open toilet seats in the bathroom, or anything that just doesn’t look inviting. Always open blinds and include window views from rooms when possible. You don’t need to hire professionals for these processes, but it can be worth investing in a quality camera to take nice photos. Again, this will be the first impression a renter has of your property. They’re not going to look twice if it looks small and uninviting. Don’t overdo the property description Be thoughtful of what goes into a property description and how you organize it. These things can get long, and if you’re a property manager, you’re keenly aware of the general public’s lack of interest in reading. A short, one-to-two-sentence description of the property will do for an opener, and you can follow that with bulleted lists of the property’s amenities. Lists are easily consumable and where the eyes of the reader will go first if they’ve decided to skim the description instead of reading through it. In addition to the features of the home, be sure to include nearby amenities in the listing. In single-family property management, schools and school districts tend to be important. Beyond that, nearby shopping areas, outdoor spaces and parks, and distance to highway access are things that property managers have found matter to prospective residents. Don’t list the property until it is move-in ready This is an easy one to check off, but making sure a home is fully ready for a resident before it gets listed is an advantageous process for property managers. You may be tempted to list it as fast as possible, but this has risks, and the theoretical shortening of time-to-revenue may end up backfiring if a great resident moves on because the home wasn't ready when they were. Renters aren’t always proactive. They tend to be looking for properties closer to their actual desired move date than maybe they should be. Listing a property before it’s move-in ready is a great way to create a negative experience if a quality resident seeks it out and it’s not ready when they want to move in. Include a floor plan Employing a third party to create floor plan drawings isn’t a super expensive or difficult undertaking, and it’s worth your while. A floor plan helps a renter understand how the house as a whole is set up, how they might use the space, and how their stuff fits in the home. There is inexpensive software that makes this process easy, or if you’re like most property managers and crunched for time, there are third parties available. This goes back to the idea of being thorough and clear in your listing. You don’t need 100 photos of the home, but you want to tell the whole story of the house as concisely as possible. A floor plan can help you do that. Think outside the box Ask yourself how you can make your listing unique. Checking all the boxes that make a quality listing is step one, but once you’re comfortable with that, you can ask yourself how to be a little bit different and stand out in the sea of property listings. While not a property manager, Trent Miller has developed a viral video series that blends content marketing with property listing strategies. He calls it the speed tour, and it is exactly what it sounds like. @trent_miller__ It's Time For Another SPEED TOUR‼️💨 Thank you guys for all the love and support!! More videos coming soon! Looking To Buy Or Sell Real Estate?? DM ME‼️🏡 ~Price Is Estimated Down Payment~ #realestate #homesforsale #RealEstate #HomeForSale #RealtorLife #DreamHome #Property #HouseHunting #NewListing #ForSale #HomeSweetHome #InvestmentProperty #OpenHouse #LuxuryLiving #HomeBuyer #HomeDecor #HouseGoals #BuyersMarket #SellingHomes #Homeownership #RealEstateAgent #speedtour ♬ original sound - trent_miller__ Garcia Property Management adds colorful overlays to the cover photos for their listings. They don't do this for every photo, so they're still following general best practices for their photo sets for each property, but also trying to stand out within the listings thanks to some color.
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How would you say your social media marketing is performing? As a constantly changing medium beholden to trends that can peak and die in a heartbeat, it can be a tough area to win. Truthfully though, it's underused in the property management space. Content creation for social media doesn't have to be super intense, and it doesn't have to be super polished. It just has to have intent and understanding of who you're marketing to. If you're looking to develop a more robust social media program for your PMC, you're in the right place. Here we break down three companies with three distinct strategies, all of which are unique in the PM space. These companies are crushing it, and learning from their successes can help you develop a strategy that works for you. Home Ladder Home Ladder’s “Chaos and Disorder” video series is a hit and a great example of creativity that can sometimes be lacking in property management marketing. Co-founders Travis Bohling and Brandon Graham are among the most creative content marketers in the property management space. While they may be relatively new to the content side of things (Chaos and Disorder is less than a year old), they've hit the ground running with a unique video series that's both relevant and genuinely entertaining in addition to leaning hard into Facebook reels. Short video content has been trending up in social media marketing since the rise of TikTok, although it's not heavily used in the SFR property management space. Home Ladder has taken this on with sets of short, straight-to-the-point thought-leadership content. The Chaos and Disorder video series is really fun, though. Home Ladder is starting to spearhead a creative approach to content marketing that the industry could really use more of. The idea here is really to engage the inability of self-managers to be effective tenant screeners, and they've told this story with two destructive characters affably named Chaos and Disorder. A constant battle in professional property management is trying to keep ahead of the self-managing landlord as self-management tech expands their capacity. Home Ladder is keyed in on that messaging here as a play to position their professional services as more reliable and thorough, and they've done it in a way that's genuinely entertaining and relatable to anyone who has ever had a bad tenant, which is anyone who has ever managed a property. RL Property Management RL Property Management CEO Peter Lohmann is crushing it on Twitter. Executives being active in the content creation space can be a big win for companies, and RL Property Management’s Peter Lohmann is a prime example. While this is a popular LinkedIn approach, Lohmann is one of very few who has taken ownership of the property management discussion on Twitter. A tougher nut to crack than Facebook and LinkedIn, Lohmann has found success and amassed over 21,000 followers via a content strategy that seamlessly blends an authentic connection to the property management space with expertise Lohmann has acquired over years in the industry. The word relatability gets thrown around a lot when it comes to any kind of content-based marketing, but being relatable isn’t a goal so much as a strategy. The power of relatability is that it establishes trust, a challenging thing to create in many online spaces. If you can establish a familiarity with what affects the people you’re speaking to on a daily basis, that establishes a trust that helps build interest in what you have to say. Lohmann’s 21K follower count didn’t come purely from expository property management tips. There's a relatability to his content that helps create that trust, which adds value to his thought-leadership content. He’s naturally an authentic person and a master communicator, and while the expertise is valuable, that lies downstream of a personal connection to other industry professionals. Property management in a nutshell: Owners with 40 units: "call me if it burns down" Owners with 1 duplex: "why did you pay $45 to cut grass? My guy only charges $30 please call me asap" — Peter Lohmann (@pslohmann) March 11, 2024 When Lohmann does get into thought-leadership content, he's an open book, which also helps establish trust. Lohmann, like many leading property managers, believes that propelling the whole industry forward is more important than holding any kind of trade secrets. He does not shy away from granular details of his company, including sharing the what and why of his entire tech stack. Cheat code for starting & growing a property management business. This is a complete list of our software stack. This is how the magic happens & how we can calmly and effectively manage ~600 units. pic.twitter.com/aTHYAp9MwH — Peter Lohmann (@pslohmann) December 23, 2021 Grace Property Management Marc Cunningham is the YouTube king. Cunningham has been in property management for over 30 years, and his YouTube strategy is arguably the best in the game. The CEO of Grace Property Management is approaching 5,000 YouTube subscribers. Part of the value of Cunningham's channel is that you know exactly what you're going to get when you go there. His content is built with a very consistent format and length. He has over 100 videos, almost all of which are between five and ten minutes long, and address a very specific issue or question in single-family property management. Cunningham's approach is expert-forward, demonstrating that there is more than one way to win in social media and property management marketing. He provides a combination of content that addresses specific questions and issues in the PM space and offers windows into his own operations and the decisions he's made. His channel's most popular videos, often having thousands of views, cover management topics like how to explain a rent increase to a resident and why you should never charge a pet deposit as well as industry trends like average rent trends and predictions for the coming years. Because YouTube content is indexed by Google, Cunningham's strategy is built more around capturing search engine traffic than the above two strategies. It's self-sustaining to a degree now because of the size of Cunningham's following, but YouTube is an excellent way to capture search traffic, something Cunningham has leveraged well.
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