At Sacramento Delta, we are property management experts who know a lot about insurance. But when it comes to insurance matters, we want you to hear directly from an expert in insurance. So, we’ve invited Kurt Bullock with Bullock Insurance to talk to us about what it means to add your property manager as an additional insured to your policy. It can be difficult for a lot of our new clients to understand, especially if they’ve never heard of it before.
Liability Coverage for Owners and Property Managers
If you have an income property and you hire a property manager, you’ll usually end up signing a management agreement. In that management agreement, there is usually an indemnity clause. When you add your property management company to your landlord policy as an additional insured, you’re protecting everyone who deals with the property and the tenants.
For example, if a tenant had a party and a guest was injured and there was a lawsuit, both the landlord and the property owner would be named in the lawsuit. So, when that lawsuit gets turned over to your insurance company for representation, you want all parties to be protected from liability. This is called premises liability. A few carriers will include this for you without any charge, and it’s the best way to protect your property.
Property owners have a laundry list of policies available to them when they’re buying insurance to protect their investment property. As property managers, we provide our owners with eviction protection. We don’t cover the loss of rent because there’s an insurance rider for that. When you have lost rents, you can recover that money through your policy.
Serving Tenants Better as an Additional Insured
During the fires in Paradise and the floods in Houston, we also found out that property managers who were listed as an additional insured on the owners’ policies were able to get help for their tenants faster. We have a lot of investors who don’t live in California, and getting to the site of a disaster right away is impossible. When the property manager is an additional insured, we can act on your behalf immediately. That’s an added benefit that we didn’t know existed until we saw our fellow NARPM members go through it. It’s another good reason to add your property manager as an additional insured.
Additional Insured versus Additional Interest
Sometimes, a landlord insurance policy will add a property management company as an additional interest. That is different than additional insured. They kind of sound the same but additional insured means the property manager is covered under the liability section of the policy. Additional interest simply means that when the policy experiences a change, such as a renewal or cancelation notice, the property manager will get a copy of that notice. It does not offer any liability protection at all. There is no protection when a management company is named as additional interest. It’s a huge difference, and you want to make sure you’re adding the company as an additional insured.
If you have any questions about this, please reach out to us at Sacramento Delta Property Management, and we’d be happy to share more information.
FAQs
Liability Protection: By being listed as an additional insured, your landlord gains an added layer of protection against potential lawsuits or claims that may arise from incidents related to your business operations on the leased premises. It safeguards their interests and reduces their exposure to financial risks.
Why do landlords want to be listed as additional insured? ›
For landlords, the primary benefit of being added as an additional insured is the ability to protect themselves financially from claims that they were liable for injury or illness. The drawback, however, is that listing an additional insured may cost more.
What are the risks of adding additional insured? ›
There is also a risk of being under-insured or uninsured as additional insureds. Second, there is the risk of breaching a contract, thus potentially becoming the insurer of the other party when they are the party obligated to provide additional insured coverage.
Who should be listed as an additional insured? ›
The bottom line is if you are having anyone work on your property as a contractor, tenant, or as a vendor, they need to name you as an additional insured on their insurance policy AND you need to verify that on the COI they give you BEFORE they do any work whatsoever.
Why would a lender want to be an additional insured? ›
Adding an additional insured is a way of enabling a person or a group other than the policyholder to file a claim in case they are sued. An additional insured is typically added to a general liability insurance policy, commercial property or commercial auto policy.
Why is additional insured important? ›
The main benefit of an additional insured endorsem*nt is that it will reduce the impact of the policy owner's loss history since the additional insured status serves to make sure that the financial responsibility of the claim is placed on the policy of the party that is most likely to be responsible for the claim.
Can my landlord force me to get renters insurance in California? ›
Unlike some other states, California landlords are allowed to require tenants to obtain and maintain renters insurance while they are under the terms of the lease.
How much does it cost to add someone as an additional insured? ›
These parties may have an interest in a project you're taking on, so an additional insured endorsem*nt helps get everyone on the same page with respect to insurance coverage. There is typically no cost to name an additional insured, but some insurance companies may charge a nominal fee to amend the existing policy.
What are the limitations of additional insured? ›
There are some notable limitations to additional insured coverage, such as: The endorsem*nt may offer coverage for only a limited type of liability (e.g., vicarious liability). Additional insureds can't be added to a professional liability insurance policy.
Does adding additional insured increase insurance? ›
Additional insured endorsem*nts do no increase the policy limits; the named insured and all additional insureds share the policy limits.
Being listed as an additional interest on their tenant's renters insurance policy allows a landlord to stay informed of any policy modifications or non-renewals. It's a simple way for a landlord to ensure their rental property is protected.
What is additional insured lessor endorsem*nt? ›
Basically, as the policyholder (Named Insured) , an additional insured endorsem*nt extends your liability coverage to a third party to address an additional liability exposure you potentially create for him.
What is the difference between additional insured and interested party? ›
Most insurance carriers allow you to add additional interest or additional insured parties to a variety of different insurance policies. The main difference between these two is that additional insureds are covered under the policy and additional interests are not.
Why would someone want to have renters insurance if their building owner has insurance Quizlet? ›
Why would someone want to have renters' insurance if their building owner has insurance? The building owner's insurance only covers the building structure. Renter's insurance covers your personal property.
