A top reason in hiring a professional property management company is to help limit your exposure and minimize the risk of owning a rental home.
Why is it important to add my manager as additionally insured?
Professional property management firms will require a property owner to add the management company as “additional insured to the home owners policy. This can often be overlooked, yet it is a very important part of risk management, not only for the property management company, but also for the property owner.
What does “Additional Insured” mean?
The additionally insured verbiage simply means the insurance policy is extended to not only cover the owner, but also the listed property management company.
Some get confused between “Additionally Insured” v “Additional Interest”, they may sound similar, however are quite different. Additional Interest does not extend coverage, only notifies the manager when a policy, lapses, cancels or has policy changes.
Neither the Additional Interest or Additionally Insured have any stake or financial interest in the property itself. This is not true, adding your property manager as additionally insured does not give your manager any financial interest in your home, only insurance protection for both the home owner and property manager.
Why is adding my Property Manager as Additional Insured so important?
When you hire a property manager, they almost immediately take over almost all the responsibilities as if they were the homeowner. If a personal injury occurs for whatever reason, the Property Manager is almost always the first target, in place of the Owner. All reputable property management firms have a strong indemnification and hold harmless clause as part of their contract. When the management company is accurately listed as Additional Insured, the coverage will automatically extend to both parties.
Worst case scenario, if a litigation claim takes place, it is highly likely both the homeowner and property manager will be named co-defendants. Have the insurance coverage extends to both parties, creates a unified defense with one insurance company defending both parties. This streamlines the defense, reducing legal expenses which the owner or insurance company is ultimately responsible for.
Why is this important to the management company the owner ads them as Additionally Insured?
Most property management firms will carry a General Liability Policy, a Professional Liability Policy, among other policies which will offer protection from a financial loss caused by the management company making a mistake or committing a wrongful act. The problem is these policies of the management company do not provide protection against issues arising from the home itself. This leaves the property manager risk from claims from someone injuring themselves at the property, a burglary, fire, water, etc. When the property manager is added as additional insured, the coverage effectively extends to the Property Manager. Without the additionally insured endorsement, the management company could be left to defend itself and then seek reimbursement from the owner directly, or their insurance company. This would be more costly for all involved.
Will my insurance company be willing to add my property manager to my owners policy as Additionally Insured?
Nearly all insurance companies understand adding the property manager as additionally serves their customers best interest. There is usually not cost or very little cost to add your manager. If your insurance company is not willing to add your property manager to your policy, it can be easily argued hiring a professional property manager will significantly reduce their overall exposure and since the owner is indemnifying the management company, the insurance company would eventually be faced with a payout on behalf of their customer. The total cost of the payout can be reduced by the insurance company being involved right from the start.
Lastly, ask your insurance company if there are any other products they are offering that may be useful to you as a property owner, such as rent loss protection, damage, etc.