All Forum Posts by: Chuck Mace

Thanks for all the great info!

I heard back from my insurance agent on this too, and he had the following to say:

"When the property management company is listed on the policy they are listed as an Additional Insured. An Additional Insured does not get all the same coverages as the named insured."

He said his underwriter explained that if there was a large enough claim, the additional insured status would not protect the PM LLC.

I have no idea what the "right" answer is - I'm in way over my head....

Thanks for the quick responses.

Richard, I have spoken with all the professionals you mentioned and have considered many options. I agree that getting them all in a room together, along with my insurance agent would make lots of sense, and save me a ton of time!

Troy, thanks for sharing how you've set things up - It sounds very similar to what I was planning to do (I'm planning to use Buildium too). In my case, I don't think the PM LLC was going to own property, but I'm not sure that matters with regards to the PM policy being discussed. In response to your second post, I'm not sure I fully understand the need for this PM policy either. Originally, my insurance agent thought this additional policy would only be needed if our PM LLC was managing other people's properties. This made sense to me and our plan was to only manage our own properties so I thought I was going to be all set. However, after he researched this, he determined the policy was needed even if we managed just our own properties. My understanding is that this entity would be viewed no differently than a regular property management company (like I might hire if I wasn't doing it myself), and such a company would be required (or recommended) to carry it's own policy.

In regards to the cost of this PM policy, my agent indicated there would be an application I would need to fill out in to order to get a quote, and the cost of the policy would depend on my past experience managing similar properties, etc. We didn’t actually go through this process, but he estimated it would probably end up costing around $3000 per year. I like your “additional insured at no extra cost” idea - I’m going to run that by my guy too and see what he thinks. Will report back….

I want to run something by the community regarding property management and see if others have done something similar:

I'm in the process of figuring out how best to setup the legal structure for a long-term, buy-n-hold rental operation in New Hampshire. After consulting many professionals, and weighing many factors, my plan was to create per-property "holding" LLCs, and a single "property management and acquisitions" LLC to operate everything.

When explaining this plan to my insurance agent, he pointed out that if I formed a property management LLC, that entity would require it's own liability policy whose annual cost would be more than trivial. He also explained that in NH, the owners of rental property are able to manage their own properties without a license, and in the event a lawsuit was brought against them (or the holding LLC) due to property-management related issues, they would be covered via the property's liability policy. In other words, the owner/manager does not need an additional liability policy just for the management function, so long as there's no PM LLC entity.

This all sounds good, in that it's one less LLC and will save a non-trivial amount of money each year thanks to not needing the additional PM policy. However, I was also planning to use the Property Management LLC as the "face of the business". This is the entity that tenants would make checks out to. This is the entity that would have a website, and maybe a logo for business cards, envelopes, letter-head, etc.. When I explained this to my insurance agent, he suggested that I simply create a trade-name (or DBA), and use that as said entity. This would allow me to have the "operating entity" or "face of the business" that I desire, and still not need the expensive liability policy that's required if this entity is instead an LLC.

Does this seem like a sound way to go?

My goal is not to save a few bucks by skimping on insurance; Again, my understanding is that the additional PM LLC policy is going to cost several thousand dollars a year and bring little (or no) additional benefit.

Thanks in advance for any comments!