If you're managing properties for other people, you're walking a tightrope. One slip—a tenant injury, a discrimination claim, an employee theft—and you could face a lawsuit that threatens your entire business. Here's the reality: property management insurance isn't just a smart idea. In most cases, it's a contractual requirement, and sometimes it's mandated by state law.
The good news? Getting the right coverage doesn't have to be complicated or prohibitively expensive. This guide walks you through exactly what property managers need, why you need it, and how to get covered without breaking the bank.
Why Property Managers Need Specialized Insurance
You're not just managing buildings—you're managing risk on behalf of property owners who trust you with their investments. That means you're exposed to liability from multiple directions: tenants, property owners, contractors, visitors, and employees.
Standard homeowner policies don't cut it for rental properties. And your clients' landlord insurance doesn't protect your business operations. You need coverage specifically designed for property management companies, which means policies that understand the unique exposures you face every day.
Most property management contracts require you to carry minimum insurance amounts and list the property owner as an additional insured. These aren't suggestions—they're requirements that protect both parties. Without the right coverage, you won't get the contract.
Essential Coverage Types Every Property Manager Needs
General Liability Insurance
This is your foundation. General liability covers the physical risks: someone slips on a wet floor during a property showing, a contractor damages a tenant's belongings, or a visitor is injured on a property you manage. The standard requirement is $1 million per occurrence for bodily injury, personal injury, and property damage. It handles medical bills, repairs, legal costs, and settlements.
For most property managers, general liability costs average around $44 per month. It's not mandated by law, but it's almost always required by your management agreements.
Professional Liability (Errors and Omissions)
Here's where things get interesting. Professional liability—also called errors and omissions or E&O insurance—protects you from claims related to your professional services. A tenant claims you wrongfully evicted them. A prospective renter alleges you discriminated based on family status. A property owner sues because you failed to address a critical maintenance issue that led to expensive damage.
This coverage is critical because you can be sued even when you haven't made a mistake. Fair housing claims, discrimination allegations, ADA accessibility issues, breach of contract disputes—these professional liability claims can cost tens of thousands to defend, even if you win. E&O insurance covers your legal defense and any damages. The typical requirement is $1 million per claim, and it costs property managers an average of $83 per month.
Workers' Compensation Insurance
If you have employees—even one—you almost certainly need workers' compensation insurance. Most states require it as soon as you hire your first employee. This coverage pays for medical expenses and lost wages if an employee gets hurt on the job. It also protects you from lawsuits: in exchange for workers' comp benefits, employees generally can't sue you for workplace injuries.
Crime Insurance and Fidelity Bonds
You're handling other people's money—rent payments, security deposits, maintenance funds. Crime insurance protects property owners if one of your employees steals those funds or commits fraud. Minimum requirements typically include $100,000 for employee dishonesty and forgery, plus $10,000 for theft and destruction. Many management agreements require this coverage, and honestly, it's good for your reputation even when it's not required.
Business Owner's Policy: The Cost-Effective Bundle
If you're a small operation—maybe you're managing a handful of properties, working solo or with one or two employees—a Business Owner's Policy (BOP) can save you money. A BOP bundles general liability insurance with property insurance that covers your office, equipment, and business property. For property managers, the average BOP costs around $212 per month for $1 million per occurrence and $2 million aggregate coverage.
The catch is that BOPs are typically only available for low-risk, small businesses. As you grow—more properties, more employees, higher-risk management scenarios—you'll likely need to upgrade to a commercial package policy that's customized for your specific exposures.
Understanding Additional Insured Requirements
Here's something that confuses a lot of new property managers: your clients will often ask to be added as an additional insured on your liability policy. This means that if a claim arises related to your management of their property, your insurance will defend them too. It's a standard request, and most policies allow it with no extra charge.
But here's the key: being added to the landlord's insurance as an additional insured does not replace your need for your own coverage. Your insurance must be primary, meaning it pays first. The landlord's policy is secondary. You need your own general liability and professional liability policies to protect your business operations, employees, and assets.
How to Get Started with Property Management Insurance
Start by reviewing your management agreements to identify the specific coverage requirements. Look for minimum policy limits, required endorsements, and additional insured language. Then, talk to an insurance agent or broker who specializes in property management or commercial real estate. They understand the unique risks you face and can help you get the right coverage at a competitive price.
Don't just shop on price—understand what's covered and what's excluded. For example, some professional liability policies exclude certain types of discrimination claims unless you purchase an endorsement. Some crime policies have strict reporting requirements. Read the fine print, ask questions, and make sure your coverage matches your actual operations.
Finally, review your coverage annually. As you add properties, hire employees, or expand into new types of management, your insurance needs will change. An annual review ensures you're not underinsured—and that you're not paying for coverage you don't need.
