Why Your Property Management Company Should Be Added as Additional Insured to Your Insurance Policy

If you've ever worked with a property management company, you may have been told that it needs to be added as additional insured to your rental property's insurance policy. At first glance, this can feel unnecessary — or even like the management company is trying to avoid carrying its own coverage. That's not the case.

Adding a property management company as additional insured is standard practice across the industry, and it exists to protect both the owner and the property manager. Here's why it matters, and why most professional management agreements require it.

What “Additional Insured” Actually Means

Insurance policies allow for a few different designations, and the distinction between them matters more than most owners realize:

• Additional Insured — the designated party (in this case, the property management company) has shared liability coverage under the owner's own policy.

• Certificate Holder / Additionally Interested — the designated party is notified about cancellations, renewals, or lapses in coverage, but is not covered under the policy itself.

A certificate holder designation is not enough to provide the protection a property management company actually needs. That's why most professional management companies require the stronger additional insured designation as a condition of the management agreement.

Additional Insured vs. Certificate Holder

Why Property Management Companies 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 from fire, storms, or other covered events.

• Liability Coverage — covers legal costs if someone is injured on the property or a lawsuit is filed against the owner.

A slip-and-fall claim is a good example of why this matters. If a tenant or visitor is injured on the property and files a lawsuit, the claim will typically name both the owner and the management company — since the management company is responsible for the day-to-day operation of the property.

When the management company is listed as additional insured, the insurance carrier can provide a single, coordinated legal defense for both parties. That significantly reduces legal costs, avoids finger-pointing between separate insurers, and moves the claims process along faster.

Does This Mean the Property Manager Doesn't Carry Its Own Insurance?

No. Professional property management companies typically carry several policies of their own, including:

• General liability insurance — covers the company's own business operations.

• Errors and omissions insurance — protects against mistakes made in management activities.

• Workers' compensation insurance — covers employees in the event of an injury.

• Contractor or fidelity coverage — covers specific work the company performs on properties.

None of these policies, however, cover liability that arises at a specific owner's property. That responsibility sits with the property owner's own policy — which is exactly why the management company needs to be added to it.

What Does This Cost the Owner?

For most owners, adding this endorsement costs nothing. Insurance agents can typically add a property manager as additional insured with a simple policy update.

Some low-cost or discount carriers, however, have strict exclusions and may refuse to add this designation. If that happens, owners generally have two options:

• Switch to a carrier that allows the additional insured endorsement.

• Discuss alternative liability coverage options that satisfy the management company's requirements.

What This Does Not Do

Naming a property management company as additional insured does not make it an owner of the policy and does not give it the ability to change coverage. It also does not replace the management company's own general liability or errors & omissions coverage. It simply extends a layer of liability protection for claims tied specifically to the property being managed.

How to Add This to Your Policy

Adding this endorsement is typically a quick call or email to your insurance agent:

• Ask your agent to add your property management company as additional insured (not just a certificate holder) on the liability portion of your policy.

• Provide the management company's legal name and mailing address.

• Request an updated Certificate of Insurance (COI) reflecting the additional insured status, and send a copy to your property manager.

• Repeat this at every renewal, since some carriers do not automatically carry the endorsement forward year to year.

The Bottom Line

Requiring a property management company to be additionally insured isn't a scheme to shift liability — it's a standard, necessary protection that ensures both the owner and the manager have a unified legal defense if a claim or lawsuit arises.

For most owners, it's an easy, cost-free step that reduces legal risk and simplifies the claims process. If your current policy doesn't allow it, it's worth discussing alternatives with your agent so both you and your property manager are properly protected.

At GEM Realty, we ask every owner we manage to complete this step, and we're happy to help you reach out to your insurance agent if you have questions about how to add it. Contact our team at (540) 940-6440 or Invest@GEMRealty.co.

This article provides general property management information for Virginia rental owners and is not intended as legal or insurance advice. Owners should consult a licensed insurance agent or attorney to review their specific policy and coverage needs.

GEM Realty Group, LLC 

1952 William Street, Fredericksburg, VA 22401

(540) 940-6440 | Invest@GEMRealty.co

www.GEMRealty.co