Protect Yourself and Your Business With Property Management Insurance
When it comes to vacation rentals, who is responsible for insurance—owners or property managers?
As a property manager, it’d be great to think that insurance falls in the hands of homeowners. Who needs another thing to worry about?
But the truth is that when it comes to property management, insurance is everyone’s responsibility. And knowing who should purchase what coverage isn’t exactly straightforward.
Here, we’ll simplify things by reviewing why property managers need insurance to protect their businesses, guests, and clients. Then, we’ll take a look at specific types of insurance for property managers.
Do vacation rental property managers need insurance?
Some property managers assume that they don’t need insurance because the properties they’re managing aren’t their own.
Don’t make this mistake. Property managers absolutely need insurance.
Insurance expert Darren Pettyjohn from Proper Insurance explains this best:
“Let’s say you manage 50 homes. What is your potential liability exposure? Well, it’s huge because you manage those homes. And we’ve had dozens of lawsuits that have been filed over the years where not only the owner gets sued, but the manager gets sued.”
Ensuring you have the right insurance coverage is the only way you can protect yourself and your business.
A note on self-insurance for property managers
Some property managers opt for self-insurance rather than paying for an insurance policy. This practice involves collecting a small upfront fee from guests for each booking. You can then use these funds, which will grow over time, in the event of a claim.
While this may work for very minor damages, it’s highly risky. In the event of major damages, such as claims involving medical expenses, you’ll run the risk of losing your business. What’s more, self-insurance hardly inspires confidence in homeowners.
What kind of insurance does a property management company need?
Property manager’s insurance
Property manager insurance coverage protects the property manager’s business itself. It covers:
- Professional liability
- Insurance for property management company employees (if your business is more than a one-person show)
- Office space (rented or owned)
- Company computers
Keep in mind that property management insurance coverage doesn’t apply to guest liability, the properties being managed, or agency managers.
Vacation rental property managers aren’t going to insure a home they don’t own. This is obviously the homeowner’s responsibility.
However, it’s in property managers’ best interest to be included in this coverage.
How does this work? Simply ask your client to add you to their homeowner’s insurance coverage as “additionally insured.” This will extend the coverage to you.
Be sure to ask for a copy of the certificate of insurance (COI) as proof of your coverage.
Vacation rental insurance
The fact that vacation rentals operate as businesses means that homeowner’s insurance alone won’t cut it. Vacation rental insurance is also necessary.
Vacation rental insurance is a type of specialty insurance that covers potential liabilities and damage that could occur when guests are staying in a short-term rental. While packages vary from one insurance company to the next, vacation rental insurance typically covers:
- Property insurance: in case a guest damages your home or items within it
- Guest liability: in case a guest is injured during their stay, or a guest accidentally damages someone else’s property and then sues you
- Theft and burglary: in case a guest steals something or there’s a break-in
Again, vacation rental insurance is the homeowner’s responsibility—not the property manager’s. But as we explained above, the property management insurance that covers your business doesn’t extend to the properties you manage. But you’re still at risk if anything happens during a guest’s stay.
So, you need to make sure that your clients have vacation rental insurance—and that you’re included in it.
Just like with homeowner’s insurance, you simply need to ask to be listed as “additionally insured” in the policy. And again, ask for the certificate of insurance as proof.
So, it boils down to this: You’re going to need property manager’s insurance and should be listed as “additionally insured” in your clients’ homeowner’s insurance and vacation rental insurance policies.
But as one last tip, we’d also recommend consulting with an insurance agent. When it comes to something as important as insurance, it’s always a good idea to double-check that all your bases are covered.