What insurance should a property management company carry for apartment buildings?
Property managers need professional liability (E&O), general liability, workers comp, cyber liability, crime/fidelity bonds, and should be named as additional insured on the owner's policies.
Property management companies face a distinct set of liability exposures that require their own insurance program, separate from the building owner's coverage. Professional liability (errors and omissions) insurance is the most critical coverage, protecting the manager against claims of negligent management, failure to properly screen tenants, mishandling of security deposits, failure to maintain the property, or errors in financial reporting. This coverage is written on a claims-made basis and typically requires minimum limits of $1,000,000 per claim.
The property manager should also carry commercial general liability insurance for claims arising from the manager's own operations, workers compensation for their employees (required under state law in virtually every state per 29 CFR 1910 and state workers compensation statutes), and commercial auto if company vehicles are used. A crime/fidelity bond is essential because managers handle owner funds, including rent collections, security deposits, and operating accounts. HUD Handbook 4350.1 requires management agents of HUD-assisted properties to carry fidelity bond coverage equal to at least two months of gross potential income.
The management agreement should address insurance responsibilities clearly. The manager should be named as an additional insured on the building owner's general liability policy, and the owner should be named as an additional insured on the manager's policy. Both parties should carry cyber liability coverage given the volume of tenant personal data processed. The management agreement should also specify who bears the cost of each coverage and what minimum limits each party must maintain.