Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. The early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.
The owner of the property offers their residence to tenants for 2 reasons: Make a profit Protect their assets
The dwelling is usually covered by the following: Theft, fire, lightning, windstorm, hail, riot, civil commotion, falling objects, aircraft, vehicles, smoke (sudden & accidental), vandalism, weight of snow, ice or sleet and sudden & accidental discharge or overflow of water. Wear and tear and maintenance issues are NOT COVERED.
Your owners are covered for damages resulting from bodily injury, personal injury or property damage arising out of the ownership, maintenance or use of a rental dwelling. Minimum Liability recommendation is $300,000, but $500,000 is better and $1,000,000 or an Umbrella policy with $1,000,000 minimum is better.
Additional Insured Endorsement Work with an insurance company/agent that can add the property management company on the landlord policy as an additional insured (not an additional interest which the management company is only notified when a policy cancels or a major change is made to the policy). An additional insured rider extends the liability from the landlord policy to the property management company. An extra layer of protection.
Personal Property Includes free standing appliances and any non-attached personal property.
Loss of Rents If your client experiences a loss of rents due to his or her property being unlivable as a result of a covered loss, he or she will be reimbursed for the losses. Make sure to have at least 3-6 months minimum of rental income endorsed to the policy.
Protection for: Personal property coverage Personal Liability coverage Loss of use Guest Medical
Personal property- provides replacement without depreciation (make sure replacement cost is endorsed) for clothing, furniture, computers, etc… Personal Liability- protects the renter if they set the home on fire by accident or have a party and someone slips and falls. This creates another line of defense to protect the landlord. 2 insurance policies in place are better than 1. Also, have the property management company added as an additional insured on the rented property.
Loss of Use- provides the renter/tenant with funds to live elsewhere while the home is being repaired for a covered loss. This helps to financially alleviate any responsibility of the landlord to pay the renter to live elsewhere. Guest Medical- coverage for necessary medical expenses incurred by guest.
What protections do Property Managers need? While the insurance needs are in many ways similar to other businesses-property, liability, work comp, group health- there are many distinctive insurance considerations as well, including…
Tenant Discrimination Insurance: Managers are covered when current, prospective or former tenants allege wrongful discrimination. Errors and Omissions Insurance (professional liability): Protects property managers against liability stemming from a variety of client/tenant financial losses, including failure to perform. Hired and Non-Owned Auto: provides additional liability for your employees when using their personal car or you rent a vehicle for business use. This is an endorsement to your business policy.
Employment Practice Liability Insurance: Defense and indemnity losses involving litigation that could arise from past, present and even prospective employer/employee relationships. Network Security & Privacy Insurance & Multi- Media Insurance: Coverage for online & offline info., virus attacks, denial of service, copyright infringement, libel/slander, false advertising, etc…
Work with insurance professionals that are versed in property management and those that participate in trade organizations in your profession. Work with an insurance professional that understands Condominium Homeowners Associations. The insurance is more complex and the insurance agent must understand how to help your clients (landlords and tenants alike).
Always get a copy of the certificates of insurance from any vendor you work with and call the insurance company to make sure the policy is in force. Water damage can be expensive. Having a plan in effect to inspect properties (within the law) can help alleviate potential claims that are possibly denied. It’s imperative that your tenants know to contact you immediately after a water loss or if they discover any maintenance issue. Provide them with a water/fire restoration company at the inception of the lease.
Establish a policy that every tenant provide renters insurance at the inception of the lease. Check your State laws to make sure you are in compliance. Establish a policy that every Landlord has a Landlord policy in force as well…make sure the policy is rated non-owner occupied. Many owners not know that they need to change the policy type from owner occupied to non-owner occupied.