If you’ve ever worked with a property management company, you may have been told that they need to be added as additional insurance to your rental property’s insurance policy. At first glance, this might seem unnecessary or like an attempt by the property manager to avoid getting their insurance. That’s not the case.
Adding a property manager as additionally insured is a common industry practice, and it ultimately serves to protect both the landlord and the management company. Here’s why.
What Does “Additionally Insured” Mean?
Insurance policies allow for different designations, and it’s important to understand the difference between them:
- Additionally Insured – This means the designated party (in this case, the property manager) has shared liability coverage under the insured party’s policy.
- Additionally Interested or Certificate Holder – This means the designated party will receive notifications about cancellations, renewals, or lapses in coverage, but they are not covered under the policy.
A certificate holder status is not enough to provide the level of protection property managers need. That’s why most professional management companies require an additional insured designation.
Why Do Property Managers Need to Be Additionally Insured?
A landlord’s rental property insurance policy generally has two main components:
- Property Damage Coverage – Protects against physical damage to the property caused by fire, storms, or other covered events.
- Liability Coverage – Covers legal costs if someone is injured on the property or if a lawsuit is filed against the property owner.
A slip-and-fall lawsuit is a good example of why a property manager needs to be covered under the liability portion of an insurance policy. If a tenant or visitor slips on the driveway and files a lawsuit, the claim is likely to include both the landlord and the property manager.
By having the property manager listed as additionally insured, the insurance provider can offer a single legal defense for both parties. This significantly reduces legal costs and streamlines the claims process.
Does This Mean Property Managers Don’t Have Their Insurance?
No. Professional property managers typically carry multiple insurance policies, including:
- General liability insurance – covers their business operations.
- Workers’ compensation insurance – Covers their employees in case of injury.
- Errors and omissions insurance – Protects against mistakes in management activities.
- Contractor insurance – Covers any work they perform on properties.
However, none of these policies cover liability issues that arise at an owner’s property. That responsibility remains with the property owner, which is why the management company must be included in the policy.
How Much Does It Cost to Add a Property Manager as Additionally Insured?
For most landlords, this costs nothing. Insurance agents can typically add a property manager as additionally insured with a simple policy update.
However, some low-cost or discount insurance providers have strict exclusions and refuse to add property managers as additionally insured. If that happens, landlords may need to:
- Switch to a different insurance provider that allows the addition.
- Look for alternative liability coverage options that meet their property manager’s requirements.
The Bottom Line
Requiring a property manager to be additionally insured is not a scheme to avoid liability—it’s a necessary protection that ensures landlords and property managers have a unified legal defense in case of a lawsuit.
For most landlords, adding a property manager as additionally insured is an easy, cost-free step that helps reduce legal risk and simplifies insurance claims. If your policy does not allow it, consider discussing options with your insurance provider to ensure you and your property manager are properly protected.