Are We Covered? 9 Insurance Checks for Property Managers

Table of Contents

1. Know Whose Policy Is Whose

2. Make Sure It's the Right Type of Policy

3. Check the Building's Insured Value

4. Understand the Wind and Hail Deductible

5. Plan for Lost Rent

6. Watch the Vacancy Rules

7. Close the Water and Building-Code Gaps

8. Manage Liability at the Tenant and Vendor Level

9. Get Organized Before the Claim

How Trust Partners Insurance Can Help

1. Know Whose Policy Is Whose

🏢 Three Layers of Coverage

The owner's property policy covers the building. The owner's liability policy covers claims from injuries or damage on the property. Then there's your own coverage as a management company: your general liability, and your errors and omissions policy, sometimes called professional liability. Knowing which policy responds to which situation is the foundation for everything else.

🛡️ Get Added as an Additional Insured

Here's the step many managers skip. Ask to be added to the owner's liability policy as an additional insured, usually through a "real estate manager" endorsement. If a tenant sues, they won't just name the owner. They'll name you too. That endorsement means the owner's policy defends you as well as them.

✅ Action Item

For every property you manage, keep a current certificate showing you're listed on the owner's liability coverage.

2. Make Sure It's the Right Type of Policy

🏠 Homeowners Policies Don't Fit Rentals

A lot of rental properties are on the wrong policy. A standard homeowners policy is written for a house the owner lives in. Once it's rented out, that policy may not respond to a claim at all.

📋 DP-1, DP-3, or Commercial?

Rental houses and small multifamily properties usually belong on a dwelling fire policy. A DP-1 is bare bones: it usually covers a short list of named perils and pays depreciated value. A DP-3 is much broader: it covers the building for most causes of loss unless they're specifically excluded, usually at replacement cost. Larger apartment buildings, mixed-use and commercial properties usually need a commercial property policy, often packaged with liability.

✅ Action Item

When you take on a new property, ask the owner for the declarations page. If you see a homeowners form on a rental, or a DP-1 on a property worth a lot of money, flag it.

3. Check the Building's Insured Value

🏗️ Insure for Rebuild Cost, Not Market Value

Is the building insured for what it would actually cost to rebuild? Not what it would sell for, and not what the owner paid. Construction costs have climbed sharply over the last several years, and many policies were set up years ago and have barely moved. If a building burns and the limit is too low, the owner pays the difference.

⚖️ The Coinsurance Trap

Many commercial policies have a coinsurance clause, usually 80% or 90%. If the building is insured below that share of its true replacement cost, the insurance company can reduce the payout on every claim, even small ones. Also check whether the policy pays replacement cost or actual cash value. On a twenty-year-old building, the gap between those two numbers can be huge.

✅ Action Item

At every renewal, ask your agent: "When was the replacement cost last updated, and how was it calculated?"

4. Understand the Wind and Hail Deductible

🌩️ Percentage Deductibles in Texas

Many Texas policies carry a separate wind and hail deductible, and it's often a percentage of the building's insured value, not a flat dollar amount. A 2% deductible on a building insured for $1,000,000 means the owner pays the first $20,000 of a hail claim. Many owners have no idea that number is in their policy until the storm hits.

🏚️ Roof Limitations

More carriers now pay older roofs at depreciated value, or exclude cosmetic damage, meaning dents that don't cause leaks. On a metal roof, that exclusion can be the difference between a new roof and a denied claim.

✅ Action Item

For every property, know three numbers: the regular deductible, the wind and hail deductible, and whether the roof is covered at replacement cost.

5. Plan for Lost Rent

💵 Loss of Rents Coverage

When a building is damaged, repairs get paid under the property coverage. But what about the rent the owner isn't collecting while units sit empty for three, six, or nine months? That's loss of rents coverage. On dwelling policies it's often called fair rental value, and on commercial policies, business income.

✅ Action Item

The mortgage keeps coming due whether tenants are there or not. Make sure this coverage is on the policy, with a limit high enough for a realistic rebuild time. On a larger building, twelve months is a reasonable place to start the conversation.

6. Watch the Vacancy Rules

🚪 The 60-Day Clause

Vacancy is one of the most common reasons claims get denied on rental property. Many property policies limit or remove coverage for vandalism, glass breakage, and water damage once a building has been vacant for a set period, commonly 60 consecutive days. Think about when properties sit empty: between tenants, during a major renovation, or while the owner gets ready to sell. Those are exactly the times this clause bites.

✅ Action Item

If a property will be vacant for more than a month or so, tell the agent early. Vacancy endorsements and vacant building policies are made for this situation, and they're much cheaper than an uncovered loss.

7. Close the Water and Building-Code Gaps

🌊 Flood, Sewer Backup, and Freeze

Flood damage from rising water isn't covered by standard property policies; it needs a separate flood policy. Sewer and drain backup often isn't covered either unless an endorsement is added. And after the February 2021 freeze, when pipes burst all over Texas, a lot of owners learned to read the fine print about maintaining heat in unoccupied units.

📐 Ordinance or Law Coverage

When an older building is heavily damaged, the city may require the rebuild to meet current code: new electrical, sprinklers, accessibility upgrades. A standard policy generally won't pay those extra costs, or the cost of tearing down the undamaged portion. Ordinance or law coverage does.

✅ Action Item

For older buildings especially, confirm there's ordinance or law coverage and sewer backup coverage, and check whether the property sits anywhere near a flood zone.

8. Manage Liability at the Tenant and Vendor Level

📊 Right-Size the Owner's Liability Limits

A pool, a playground, exterior stairs, a pet-friendly policy: all of these raise the stakes. A $1 million liability limit with an umbrella policy on top is common for serious investors.

📝 Require Renters Insurance

Require renters insurance in your leases, and ask to see proof. When a tenant's kitchen fire damages the unit next door, their renters policy can respond first. That keeps the claim off the owner's policy and protects the owner's premium.

🔧 Collect Vendor Certificates

Every plumber, roofer, and landscaper who sets foot on the property should carry general liability, and workers' comp if they have employees. Ask to be named as an additional insured along with the owner. If an uninsured contractor falls off a ladder, you don't want that claim landing on your owner, or on you.

9. Get Organized Before the Claim

🗂️ Build a Policy Tracker

The best time to prepare for a claim is long before it happens. Keep a simple spreadsheet for every property you manage: the carrier, policy number, renewal date, building limit, deductibles, and the agent's contact information.

📸 Document Every Property

Take date-stamped photos and video of every property at least once a year, inside and out, including the roof. Keep receipts for major upgrades like roofs, HVAC systems, and plumbing.

⏱️ Act Fast When a Loss Happens

Protect the property from further damage, document everything, and report the claim promptly. Late reporting is one more reason claims get reduced or denied.

🗓️ Review Before Every Renewal

Schedule a review with the owner's agent every year, at least 60 days before renewal. That gives you time to fix problems and shop coverage if needed, instead of rushing at the last minute.

How Trust Partners Insurance Can Help

🔁 Quick Recap

Know whose policy is whose, and get yourself added as an additional insured. Make sure it's the right type of policy. Insure the building for what it costs to rebuild. Know the wind and hail deductible. Protect the rental income. Watch the vacancy rules. Close the water and building-code gaps. Manage tenant and vendor liability. And get organized before the claim. Do those nine things, and when an owner asks, "Are we covered?", you'll have the answer.

📞 Connect With Trust Partners

If you'd like a second set of eyes on the properties you manage, that's what we do at Trust Partners Insurance. We work with property managers and real estate investors across Texas, and we're happy to review your owners' policies at no cost. Call us at 469-999-8758 or visit trustpartnersins.com.