Authorization to Add Agent
All right. Well, we're moving this discussion along, and the next housekeeping document is authorization to add agent as an additional insured. When you own a house and it's a rental property, your insurance company understands that the manager has some liability, and if the house burns down, the manager doesn't get any money. But if there's a child caught in the fire, there's going to be a wrongful death suit, and the owner's covered by their policy. You want to be covered by their policy as well.
Now, step back just a second, and as a general business practice, this is something you want to do on a regular basis. And that is, if you're dealing with somebody, whether they're a commercial tenant or a vendor, you want to make sure that their policy names you as an additional insured. So on all your big contractors that you use, if there's anybody you're doing any kind of real volume with, you'll require they go to their general liability carrier and add you as an additional insured.
Liability Coverage
All that means is if they fall off a ladder or they burn down a house, that their insurance company is going to defend you as well as the vendor. Now, you still have general liability insurance to cover you, but you don't want to use your insurance. You want the other people's insurance to be protecting you. So whether it's a vendor or when you lease office space. When I leased this office space, the landlord insisted that they be added as an additional insured on my liability policy, and that's perfectly normal.
So owners get this. They understand that you, as the manager, have to be added to their insurance as an additional insured. Now, there's kind of a challenge here sometimes because the owner's too busy, their insurance agent is somebody they don't do much business with, don't contact very often, or in some cases, the insurance agent will get a little pushback. And the reason is there's no money in it for them. In most insurance companies, to add the manager as an additional insured, doesn't cost the owner any money.
It's just an administrative work. So the agent isn't going to make any money on this, and as a result, the agent will say, "No, my insurance company won't do that." And that's baloney. Every insurance company does. So this is a tool to help you wrestle through that issue because many times owners are too busy to deal with it.
Owner's Responsibility
So you want the owner signing this. Okay? And up here, it's a note to them to just say, it is normal that when you have a property manager, since they have an insurable risk, that the insurance company will cover you as an additional insured. So this kind of informs them, and then the owner says, "My insurance agent's name is this," the company name, the policy number, the phone number, the fax number. And if the owner doesn't do this, you need to step in and call the agent, press down on the agent a little bit, and you'll get a dec page, a declaration page with your name and address on it.
And then if the policy cancels, you'll get a notification of that cancellation. So with you being added as an additional insured, you have more protection, your liability goes down, your risk goes down, and you kind of piggyback on the owner's insurance policy.
Management Agreement
Now, there's a stipulation in your management agreement that reminds the owner of this requirement, and here's a sentence you could put at the end of that paragraph. We didn't put it in because we just didn't do it that way, but you should consider this. You should put a sentence at the end of that paragraph that says, if the owner fails to get the dec page or get you added to their policy, then you agree to go out and get it, and the owner agrees to pay a monthly premium of $7, or $9, or $6, or some insignificant amount to pay you because they couldn't get you covered under their policy. Now, you can't go out and get insurance.
You don't have that much of an insurable interest. It's not something where you're going to take that money and go out and insure that property with you as the insured. I'm going to be able to do that. But it's a revenue stream that kind of says, my risk is higher because the owner can't cover me or won't cover me under their own liability policy. And so there's a risk there.
So you should charge for that risk. Owners are fine with it, but mostly it's a threat to get them to beat on their insurance agent and get this done. So let's make sure I've covered everything.
Best Practices
Always good business practice to get the other guy to add you under their insurance policy. Costs the owner nothing. Insurance companies understand it. Years ago, State Farm had it hardwired into their policy. You didn't even have to ask.
So if we had an owner insured with State Farm, we didn't even get this dec page because in the hard copy of the policy, any property manager was automatically covered. So companies understand this. Don't be afraid of it. Owners are busy, and they need help with follow-up. You'll get a dec page in the mail, and if they don't, you should charge something.
If they don't get you covered, they should pay for something. Okay, we're at the end of this one. We're going to move on next to kind of a features page, and I think it's going to wrap up this discussion. Go ahead and move on to the next video.
