Adding Your Property Manager As Additional Insured

If you have invested in real estate and find yourself having hired a great property manager to handle the day-to-day duties of managing your rental properties, you may not be overthinking about your home insurance policy. However, we suggest you do a quick turnaround and give serious thought to making your property manager an additional insured on your home insurance policy. Should you choose to do so, we have no doubt it will be very beneficial to both of you. In most cases, the property manager you hired will make this request on their own, and this may even be included in the contract the two of you sign. Yet whatever the circumstances, you'll probably want to have additional information as to the specifics on this business matter.

 If you have a request for an additional insured property manager, you're probably wondering why they don't just get their own insurance coverage. We find this question gets asked quite a bit, and the truth is they do often purchase two specific types of insurance to protect themselves in their job, those being general liability and errors and omissions insurance. Regarding general liability, this is insurance purchased by most businesses and service providers and is done so to cover risks associated with day-to-day aspects of their business. As for E&O insurance, this will protect you, and your property manager should a mistake be made, such as a wrongfully-evicted tenant who later files a lawsuit. 

 Since insurance issues can often be as complicated as taxes, you're probably grinding your teeth, pulling out your hair, and want to curl up in the fetal position when thinking about dealing with an insurance company. While we feel your pain, you need to remember this request is being made for a very important reason. To begin with, your property manager cannot get insured for property they do not directly own. In addition, the request is being made because, contrary to the belief of many property owners, their property manager is not by default covered by the home insurance policy. 

 In many situations, rental property owners fail to think an additional insured property manager is necessary. When this mistake is made, we find something almost always happens that makes them regret their decision. While your insurance coverage will protect you and your property, there is a loophole we strongly suggest you pay attention to and close as quickly as possible. Since a property manager is exposed to the same types of liabilities as you are as the property owner, they will also need protection against property-related legal claims. These can include:

 Should you fail to act to ensure this loophole is closed, the potential liability can wreak havoc on your real estate investments. In fact, it could reach the point where owning rental property could become too risky and financially unreasonable, so don't let things get to this point.

 Adding Your Property Manager to Your Insurance Policy

 Once you've recovered from the shock of what can happen if you don't have a property manager additional insured, we imagine it's time you contact your insurance company and start making the necessary arrangements. In most situations, we have found this conversation may have three outcomes. First, the property manager will be added as an "additional interest" on your policy. While this sounds like a problem solved, you should know this just means the property manager will get policy-related notifications but will not be an additional insured. In other instances, we have found many insurance companies want to charge extra fees for an additional insured property manager. If this happens, we advise you go ahead and do it, but then start shopping for a new insurer who will waive these charges or offer you lower rates.

 What if the Request is Rejected?

 As for the third possibility, we find that from time to time, an insurance company may decide to reject the request for a property manger additional insured. Should this happen to you, we suggest you don't panic. Instead, keep moving forward with your request, since more than likely the insurance company will relent and allow this to happen. Though adding another party to the policy increases the company's risk, it does also have an incentive to stay competitive with other companies. In the end, profits often win out, so don't be afraid to suggest you may look elsewhere for coverage if necessary. 

 Though we know the process of adding your property manager as an additional insured can be time-consuming and maybe take you away from other things that are far more fun, it is nevertheless an important aspect of building your real estate empire. After all, it may take only one lawsuit from a disgruntled tenant to make your financial picture begin to crumble before your very eyes. Rather than let this happen, always close the loophole associated with adding your property manager as an additional insured. Once you do, you'll not only have all the legalities taken care of, but also be able to kick back, prop up your feet, and get back to enjoying the profits from your properties.

Do you need a property manager in Redding, California to help you with your rentals? If so let's chat as see how Authority PM can remove the pressure and headache you are feeling.