property management denver colorado

Property Insurance from Three Perspectives

When a home investor hires a property management company, three parties are involved when a property is rented to a tenant – the property manager, the tenant, and the homeowner. Each party should insure against risks associated with managing, leasing, and owning real estate.

The Property Management Company Perspective

Property management companies need insurance because of the business risk associated with leasing residential real estate to others, managing properties for owners, and hiring service companies to fix and maintain homes. A well-thought-out insurance policy will protect property managers from liability claims, legal proceedings, and losses caused by perils, such as fire, lightning, storms, or crime. Below are the types of coverage needed by property insurance companies.

Professional Liability Insurance

Property managers usually carry professional liability insurance, also called errors and omissions, to protect them from claims against the invasion of privacy, wrongful eviction, hiring unlicensed contractors, and other actions. The insurance covers any tenant and landlord financial loss directly related to a mistake made by the property manager.

The Residential Property Owner Perspective

Rental property insurance protects owners against the financial risks of renting to tenants. Generally, the insurance covers the structure of the property, contents belonging to the owner, liability coverage, and loss of rental income. Wise property managers should check that their homeowners have rental insurance to be protected from all angles.

Dwelling Coverage

Dwelling insurance covers any physical damage to a home’s walls, roof, and other structures caused by perils such as fire or lightning. Add-ons can cover items left on-site by the landlord. For example, if a snowblower is left at the property and damaged by a fire, the dwelling coverage with a personal property add-on would cover the damage to the machine. However, this insurance does not cover any tenant personal property damage.

Liability Coverage

Liability coverage protects property owners from the legal and medical costs if someone is injured on their rental. If the owner is deemed responsible for the injury, rental property insurance covers these costs up to the policy limits.

Loss-of-Rent Coverage

Loss of rental income is usually an add-on to standard rental property insurance. It provides lost rent payment coverage if the property becomes uninhabitable due to a covered peril such as fire.

The Tenant Perspective

DenCO Property Management & Sales (DenCO) recommends that tenants obtain renters insurance. These policies are low-cost and offer coverage for the theft, loss, or destruction of personal belongings in the event of a covered peril. More importantly, renters insurance covers any property damage caused by tenant negligence. For example, if the renter forgets to blow out a candle and results in fire damage, the owner’s insurance company most likely will sue the tenant. If the tenant has renters insurance, their insurance company will handle the litigation. Otherwise, the tenant will have to bear the lawsuit and pay any awarded damages themselves.

DenCO is a fully insured property management company. We manage properties in Denver’s top neighborhoods and offer real estate brokerage services. Please call 303-722-9688 for an appointment.