As anyone can probably guess, owning a residential rental property can be both personally and financially rewarding. But it can also be just as risky as drinking expired milk, especially if you’re new to the game.
And without the right apartment building owner’s insurance, landlords can face serious financial harm if something goes wrong.
But that’s why we’re here. To help walk you through the coverages you need to properly protect yourself. And when you’re ready, our independent insurance agents can help take it from there.
They’ll shop multiple companies, bring you more options than anyone else, and make sure you get the price you’re looking for. So, let’s get started.
Risks Faced by Apartment Building Owners
The primary concern for apartment building owners is protection of the property from catastrophic events. Property insurance alone is complicated; your coverage and how much it costs vary depending on the building’s location, type of construction, and a number of other factors.
Your apartment complex insurance also needs to protect you from liability claims and other, less obvious things, like lost income(rent) after a covered loss. You need an independent insurance agent to help you determine the coverage you need to make sure you are fully protected.
Just a few of the risks apartment building owners have to deal with include:
- Fire, storms, and other catastrophic damage to the property
- Liability for tenant, employee and visitor injuries
- Theft or vandalism
- Loss of rental income
- Invading the right to privacy
- Advertising liability
- Discrimination lawsuits filed by disgruntled tenants or employees
- Allegations of fraud, misrepresentation, and other intentional acts by employees
These risks can all be addressed with just a few insurance policies tailored to your needs.
Basic Coverage for Apartment Building Owners
To make it in the landlording world, apartment building owners need several business insurance policies to protect them from all-too-common property and liability risks.
The most common coverages are commercial property ad commercial liability, however, your unique situation may benefit from a few other types.
Commercial property coverage protects against the loss of your apartment building or buildings within a complex, as well as other structures on the property, like: garages, office space, common areas, fences, swimming pools, and storage buildings.
Your apartment building property insurance should also cover any additions or improvements that are completed or under construction, as well as any business personal property that is kept on the premises and used to maintain or service the building and grounds.
The amount of coverage you need and the cost of coverage depend on a variety of factors including the following:
- The age of your roof and mechanical systems
- The age of the building
- The location of your building or complex
- The type of building (e.g., high-rise, duplex, multifamily, etc.)
- The type of construction
- The presence of a swimming pool, fitness center or clubhouse
- The presence of up-to-date security and fire protection systems
Remember that your property insurance coverage is subject to a deductible if you have to file a claim. If you own a large complex with multiple buildings, does your deductible apply per building, or per occurrence?
Imagine that several buildings in your complex fall victim to hail damage and need roof repairs. A per-building deductible requires that you pay the deductible for each building that needs repairs before your coverage pays for the damage.
A per-occurrence deductible, on the other hand, requires you to pay one deductible regardless of the number of buildings that sustain damage.
This two options are important for you to understand to help you choose wisely when purchasing your coverage. Your agent can help walk you through any questions you have on the pros and cons to both, too, so don’t be scared you’ll make the wrong call.
Apartment building owners also need loss of income coverage. This important coverage reimburses you for lost business income(rent) if the property is damaged by a covered loss (storm, fire) and results in a loss of income or suspension of operations while repairs are made to the property. And that’s huge, because missing out on some, or all, of that income can put a significant dent in your operation.
Commercial General Liability Insurance, or Landlord Insurance, protects against claims of actual or alleged property damage or bodily injury by third parties (tenants, visitors, repair persons, delivery persons, etc.).
This is the type of coverage you need to protect you from lawsuits if a tenant or visitor is injured at the property’s pool or gym, or suffers a minor event like a slip, trip, or fall on the premises.
Other Coverage Options for Apartment Building Owners
Talk to an independent insurance agent about the following additional types of apartment building insurance that you may need.
- Equipment breakdown/boiler and machinery coverage covers damage and loss of income caused by a breakdown of covered equipment, including steam boilers and other mechanical systems.
- Commercial umbrella insurance provides excess liability protection for events that exceed the limits of your other liability coverage.
- A business owners policy (BOP) bundles commercial liability, commercial property, and business interruption coverage into one affordable policy designed for small businesses.
- Professional liability coverage, or errors and omissions insurance, protects apartment owners and landlords from claims that they have financially harmed someone due to professional negligence or errors.
- Workers compensation insurance protects employees who work on the premises from the costs of work-related illnesses or injuries.
- Commercial auto insurance covers any autos owned by your rental property business, including shuttle buses or maintenance trucks.
Tips to Avoid Liability Claims
Apartment building owners are often the subject of liability claims and lawsuits. Even if a claim is invalid, one lawsuit can cost you a pretty penny just to defend yourself.
Here’s a few tips to help you minimize your risk of lawsuits from tenants and other visitors to your apartment building:
- Have proper insurance. A tenant can sue you for a number of different reasons that you may have never thought of, like: not following proper eviction procedures, entering a unit unlawfully, or even if someone is injured on the premises because of dangerous conditions. Liability insurance covers the cost of litigation (attorney fees and court costs) and can pay the damage award if you are sued.
- Keep your property in good condition. In many states, landlords are legally responsible for any failure to keep tenants safe from dangerous conditions on a rental property. Stay compliant with all health and safety regulations, and make repairs promptly to minimize your risks.
- Remove environmental hazards. Environmental hazards, like lead paint, radon, and carbon monoxide, should be professionally dealt with on your property as soon as they are discovered. Exposure to your residents can leave them in serious medical situations and can leave you with an enormous legal bill.
- Make security a priority. Courts have found landlords partially responsible for crimes that occur on their properties if they did not provide adequate security. Like if the front door had a damaged lock and someone entered the property and harmed someone. Take safety seriously by examining the property carefull and screening potential tenants and employees.
- Don’t discriminate. The Fair Housing Act prohibits a building owner from refusing to rent to a tenant for reasons of race, religion, gender, national origin, disability, or family status. A tenant or potential tenant who believes that his or her civil rights have been violated can sue you, and even if you are innocent, it will cost you a ton of time and money to defend yourself.
- Never violate a tenant’s privacy. In many cases, you are required to give 24-hour notice before entering a rental unit.
- Communicate important information. Tenants should be notified of important (and potentially dangerous) information about the property, like mold in the bathroom or even a sex offender living in the complex.
While you should have general liability coverage to protect yourself from lawsuits, not every type of claim is covered. Be sure to understand what is covered and what is not covered by talking thoroughly and truthfully with your independent insurance agent.
How to Find the Best Insurance for Apartment Building Owners
Apartment buildings present a very unique set of risks that owners must insure against. With the help of an experienced independent insurance agent, you can find the right mix of property and liability coverage to protect your assets, even in the worst of times.
The Benefits of an Independent Insurance Agent
Independent insurance agents are kind of like the Google of insurance quotes. You tell them what you’re looking for, and they bring in the results. And since they aren’t tied down to one carrier, they’re free to shop around and bring multiple policy options to the table.
And it gets better, you don’t have to review the policies alone. They’ll walk you through everything you need to know about finding the right coverage, and price, for you.
But it doesn’t end with your signature. Along the way, if something bad ever happens, they’ll handle the entire claim process for you and deal with the carrier, so you can focus on your real estate empire.