Commercial property managers are responsible for protecting buildings, serving tenants, coordinating repairs, supervising vendors, collecting rent, and responding to emergencies. A single accident, maintenance issue, cyberattack, or professional mistake can create significant financial consequences.
A well-designed insurance program can help protect the property management company, its employees, and the commercial properties it manages. Below are answers to common questions about insurance for commercial property managers.
What insurance does a commercial property management company need?
Coverage should reflect the services the property manager provides, the types of properties managed, the number of employees, and the company’s contractual responsibilities. Common policies include:
- Commercial general liability insurance
- Property managers professional liability insurance
- Commercial property insurance
- Workers’ compensation insurance
- Cyber liability insurance
- Crime and employee dishonesty insurance
- Employment practices liability insurance
- Commercial auto insurance
- Hired and non-owned auto liability
- Commercial umbrella insurance
Depending on the operation, additional coverage may be needed for environmental liability, equipment breakdown, tenant discrimination claims, or business interruptions.
What does general liability insurance cover?
General liability insurance can protect a property management company against claims involving bodily injury, property damage, and certain personal or advertising injuries.
Examples may include:
- A visitor slipping in a common area
- An employee accidentally damaging a tenant’s property
- A maintenance activity causing damage to another part of a building
- A claim involving libel, slander, or certain advertising activities
General liability does not cover every risk. Professional mistakes, employee injuries, cyber incidents, and vehicle accidents usually require separate policies.
Who is responsible when someone is injured at a managed property?
Responsibility depends on the cause of the accident, the management agreement, and the actions of the property owner and manager.
For example, the property manager could face a claim if it failed to address a reported hazard, arrange a necessary repair, or follow an established inspection procedure. The property owner may also be named in the lawsuit.
Both the owner and property manager should maintain appropriate liability insurance and clearly define their responsibilities in the management contract.
What is property managers professional liability insurance?
Property managers professional liability insurance, also known as errors and omissions insurance, can cover claims arising from alleged mistakes or failures in professional services.
Claims may involve allegations that a property manager:
- Failed to perform inspections
- Did not arrange necessary maintenance
- Improperly handled lease administration
- Failed to enforce lease requirements
- Provided incorrect information
- Hired an unqualified contractor
- Mishandled tenant complaints
- Failed to follow an owner’s instructions
General liability insurance typically does not cover most professional errors.
Does property manager insurance cover tenant discrimination claims?
Standard liability or professional liability policies may exclude or limit coverage for discrimination claims. Property managers can face allegations involving leasing decisions, accessibility, harassment, retaliation, or unequal treatment.
Specialized coverage may be available for tenant discrimination and fair housing claims. Property managers should review policy definitions, exclusions, defense coverage, and available endorsements with an experienced insurance agent.
Is the building covered by the property manager’s insurance?
Usually, the building owner is responsible for insuring the structure. The property manager’s commercial property policy typically covers property owned by the management company, such as office furniture, computers, records, and equipment.
However, the property management agreement may assign certain insurance responsibilities to the manager. Each party should understand who is responsible for insuring the building, tenant improvements, maintenance equipment, and other property.
What should commercial building insurance cover?
A commercial property policy may protect the building and related property against covered causes of loss. Important coverage considerations include:
- Building replacement cost
- Business personal property
- Tenant improvements and betterments
- Signs, fencing, and exterior property
- Equipment breakdown
- Water and sewer backup
- Ordinance or law coverage
- Business income and rental income
- Debris removal
- Flood and earthquake coverage
The building’s age, construction, occupancy, location, roof condition, electrical systems, plumbing, and loss history can affect coverage and pricing.
What is replacement cost coverage?
Replacement cost coverage generally pays the cost to repair or replace covered property with materials of similar kind and quality, subject to policy terms and limits.
Actual cash value coverage may subtract depreciation based on the property’s age and condition. Property owners should understand which valuation method applies and whether the building limit reflects current construction costs.
Why is ordinance or law coverage important?
Older commercial buildings may not comply with current building codes. After a covered loss, local authorities may require upgrades to electrical, plumbing, structural, accessibility, or fire-protection systems.
Ordinance or law coverage can help pay for certain additional costs associated with:
- Demolishing undamaged portions of a building
- Removing debris
- Rebuilding to current codes
- Required accessibility or safety upgrades
Without this coverage, the property owner may be responsible for significant out-of-pocket expenses.
What is equipment breakdown insurance?
Equipment breakdown insurance can cover certain losses caused by the accidental breakdown of boilers, HVAC systems, elevators, electrical equipment, refrigeration systems, and other mechanical equipment.
Standard commercial property insurance may not cover every type of mechanical or electrical failure. Equipment breakdown coverage may also help pay for property damage, repairs, lost income, and certain spoilage losses.
Does commercial property insurance cover water damage?
Commercial property insurance may cover sudden and accidental water damage, such as damage caused by a burst pipe. It generally does not cover every water-related loss.
Coverage may be limited or excluded for:
- Flooding from outside the building
- Sewer or drain backup
- Long-term leaks
- Poor maintenance
- Groundwater
- Repeated water intrusion
Flood insurance and water-backup endorsements may be needed for broader protection.
Does commercial property insurance cover floods or earthquakes?
Flood and earthquake damage are generally excluded from standard commercial property policies. Separate policies or endorsements may be available.
Property managers should understand the building’s location, flood zone, earthquake exposure, lender requirements, and the cost of business interruption following a catastrophe.
What is business income and rental income coverage?
Business income coverage can help replace lost income and pay certain continuing expenses when a covered property loss interrupts normal operations.
Rental income coverage may help replace rent that the property owner cannot collect while covered damage makes a building or rental space unusable. The policy should provide a sufficient coverage period, especially when major repairs or code upgrades could take many months.
Are tenant belongings covered by the building owner’s insurance?
The building owner’s insurance generally does not cover a tenant’s furniture, equipment, inventory, or other business property. Commercial tenants should maintain their own property and liability insurance.
Lease agreements should clearly state the tenant’s insurance obligations and require updated certificates of insurance when appropriate.
Should property managers require insurance from tenants?
Commercial property managers should work with property owners and legal counsel to establish appropriate tenant insurance requirements.
Depending on the lease, tenants may be required to carry:
- Commercial general liability insurance
- Business property insurance
- Workers’ compensation
- Business income insurance
- Commercial auto insurance
- Liquor liability insurance
- Professional liability insurance
- Umbrella liability insurance
The required coverage should reflect the tenant’s operations and risk level.
What insurance should contractors and vendors carry?
Before allowing contractors to begin work, property managers should verify that they carry appropriate insurance. This may include:
- General liability insurance
- Workers’ compensation
- Commercial auto insurance
- Professional liability insurance
- Umbrella liability insurance
The contractor may also be required to name the property owner and management company as additional insureds. Written contracts and current certificates of insurance should be obtained before work begins.
Is a certificate of insurance enough to verify coverage?
A certificate of insurance provides a summary of coverage on the date it is issued, but it does not guarantee that coverage will remain active or automatically provide additional insured status.
Property managers should review certificates for:
- Correct business name
- Policy dates
- Coverage limits
- Insurance company information
- Required policy types
- Additional insured requirements
- Cancellation provisions when available
Additional insured protection generally requires an endorsement to the policy.
What is additional insured coverage?
Additional insured coverage can provide certain liability protection to another party under the named insured’s policy. Property owners and management companies commonly request additional insured status from tenants, contractors, and vendors.
The protection provided depends on the language of the endorsement. A certificate alone does not create additional insured status.
Does a property management company need cyber liability insurance?
Property managers often store sensitive information, including tenant records, leases, banking details, payment information, employee data, and property access information.
Cyber liability insurance can help respond to:
- Data breaches
- Ransomware attacks
- Business email compromise
- Fraudulent electronic payments
- Network interruptions
- Privacy claims
- Notification and credit-monitoring expenses
- Data recovery costs
Property managers should also use multifactor authentication, employee training, secure payment procedures, and regular data backups.
What is crime and employee dishonesty insurance?
Crime insurance can protect a business against certain losses involving employee theft, forgery, computer fraud, funds-transfer fraud, and other criminal acts.
This coverage can be especially important for property management companies that collect rent, handle deposits, manage operating accounts, or have access to client funds.
Does a property management company need commercial auto insurance?
Commercial auto insurance may be needed when the company owns vehicles used for inspections, maintenance, tenant services, or other business activities.
If employees use personal, rented, or borrowed vehicles for company business, hired and non-owned auto liability coverage should also be considered. Personal auto insurance may not fully protect the property management company after an accident.
What does workers’ compensation cover?
Workers’ compensation insurance can help pay medical expenses, rehabilitation costs, and a portion of lost wages after a covered work-related injury or illness.
Property management employees may be injured while:
- Inspecting a building
- Climbing stairs or ladders
- Performing maintenance
- Moving equipment
- Responding to an emergency
- Traveling between properties
Workers’ compensation requirements vary by state.
What is employment practices liability insurance?
Employment practices liability insurance can cover certain claims involving wrongful termination, discrimination, harassment, retaliation, and other employment-related allegations.
Property management companies with employees should also maintain written employment policies, train supervisors, document performance issues, and establish procedures for reporting workplace concerns.
Does a property manager need commercial umbrella insurance?
A commercial umbrella or excess liability policy provides additional limits above certain underlying liability policies.
This coverage can provide important protection when a serious injury, vehicle accident, or lawsuit exceeds the limits of the primary policy. Property owners and management agreements may also require higher liability limits.
How can property managers reduce insurance claims?
Effective risk management can reduce accidents, limit damage, and improve insurability. Helpful practices include:
- Conducting regular property inspections
- Documenting maintenance and repairs
- Responding promptly to tenant complaints
- Maintaining lighting, railings, stairs, and walkways
- Testing smoke alarms and fire-protection systems
- Using qualified and insured contractors
- Keeping roofs, plumbing, and electrical systems maintained
- Developing emergency-response plans
- Training employees in cybersecurity
- Reviewing leases and management agreements
- Keeping accurate incident reports
- Maintaining tenant and contractor insurance records
Good documentation can be extremely valuable when defending a claim.
How much does property management insurance cost?
Insurance premiums depend on factors such as:
- Number and type of properties managed
- Total square footage
- Services provided
- Annual revenue and payroll
- Number of employees
- Claims history
- Property locations
- Tenant operations
- Vehicle use
- Coverage limits and deductibles
- Contractual responsibilities
A company managing office buildings may have different insurance needs than one managing shopping centers, warehouses, medical offices, or mixed-use properties.
How often should coverage be reviewed?
Property management companies should review their insurance at least annually and whenever they:
- Add a new property
- Begin managing a different property type
- Hire employees
- Purchase vehicles or equipment
- Expand maintenance services
- Change how rent or deposits are collected
- Enter a new management agreement
- Take responsibility for additional building operations
- Experience a significant claim
- Expand into another state
Insurance coverage should evolve as the property management company grows.
Protect Your Property Management Business
Commercial property management creates a combination of property, liability, professional, employment, crime, and cyber risks. A basic business policy may not address every exposure.
[Agency Name] can help evaluate your operations, review your management agreements, identify potential coverage gaps, and develop an insurance program suited to the properties you manage.
Contact us today to request a commercial property management insurance review.
Coverage descriptions are general and are not a guarantee of coverage. Actual coverage is determined by the policy’s terms, conditions, limits, endorsements, and exclusions.