If your building is managed by a professional property management company, they are probably the ones handling the insurance for your building. Having a professional property management firm handling your insurance, doesn’t mean that landlord’s doesn’t have to know anything about insurance, after all they are the ones making the final decisions on the insurance, and they’re the ones that will be effected if anything was not right on the insurance policy.
Here are just a few things you should know when it comes to the insurance of your buildings.
Shopping for Insurance
Make sure that your managing agent shop’s out your insurance policy every year. Rates change from year to year, so you have to make sure that you’re getting the best policy out there. The time to start shopping for insurance is 90 days before your renewal date. This way the broker has enough time to negotiate coverage & pricing with the underwriters. It’s also very important to make sure that the managing agent is not getting any kickbacks from the insurance broker, it is illegal and it creates a conflict of interest, so you’re not getting the best insurance policy that you deserve.
Insurance Company Rating & Stability
It is important to make sure that your carrier is an admitted insurance company in your state. This will help you in the event that your insurance company denies a claim, or becomes insolvent. The insurance company should have a rating of at least ‘A’ or better, rated by A.M. Best rating. You could check the company’s rating at www.ambest.com/consumer. The size of the insurance company is another important factor to consider. Make sure that they are a big insurance company and have enough money in reserve. You”ll find the size on A.M Best. The biggest size is XV.
General Liability Insurance
Over the years, insurance companies have been adding exclusions to their GL (general liability) Insurance policies. Some of the most common exclusions to look out for are; 1) Lead & Mold Liability Exclusion – This will exclude any claims for lead & mold contamination. Any building built prior to 1980 should make sure to have lead coverage included in their policy. 2) Employment Practices Liability Insurance (EPLI) Exclusion – This will exclude any litigation for employment related claims, i.e. minimum-wage discrimination, wrongful termination, etc. 3) Assault & Battery Exclusion.
Also, make sure to add ‘Hired & Non Owned Auto‘ coverage to your GL policy. This will cover third party damages, in the event of an accident caused by you or anyone else, while driving for business use. i.e. if the superintendant of the building causes an accident, even with his own car, while going to the store to pick up building supplies, the association is then liable for those damages, and the auto insurance carrier will subrogate against you.
Workers’ Compensation
When a building has employees, we all know that you need to have a workers’ compensation policy in place. But what if your building does not have any permanent employees? Even if your building doesn’t have any employees, you should still carry a workers’ comp policy, for those times that a laborer is hired, to do any type of work for your coop or condo building. This will protect you against any claims from injured workers. This is generally not an expensive policy, because the rates are based on the amount of annual payroll, (which is obviously low in your case,) and also the workers comp rates are regulated by the state.
Umbrella Insurance
Umbrella/Excess insurance is very important for a building. There are programs out there, which will cover you up to Two Hundred Million Dollars ($200,000,000), at a very manageable premium. Sometimes you might find that your management company has their own master umbrella policy, which covers all the buildings that they manage. This is not good for your building for 2 reasons; 1) the banks might give the unit owners a hard time with mortgages if you don’t have your own umbrella policy. 2) You might be overpaying, since your rates will be affected by claims from any one of the other buildings, covered under the same umbrella insurance policy. If you do end up being covered through your management company’s master policy, you need to make sure that the policy has a per-location aggregate limit. This will provide separate limits to each building, and will avoid the limits to be exhausted from a claim at one of the other buildings.
Tenants Liability
Your management company should make sure that all tenants carry their own property and liability insurance. This will prevent any claims, arising due to the negligence of a tenant go against the landlord.