Key takeaways:
- Certificates of Insurance (COIs) are crucial for property managers and landlords to mitigate financial and legal risks in real estate operations.
- Best practices include obtaining COIs from all contractors and tenants, verifying coverage details, and being named as an additional insured.
- Implementing an automated COI tracking system, such as that offered by bcs, is essential for efficient management, reducing administrative burden, and ensuring timely renewals. It provides peace of mind by eliminating the risk of expired or inadequate coverage.
Liability should be front of mind when dealing with high-value assets such as real estate. If not, you’re probably in the wrong business.
For property managers and landlords, certificates of insurance (COIs) are a major bulwark against financial risk and legal hazards. But to fully benefit from a COI, you need to adopt several best practices for real estate including requiring COIs from all contractors and tenants, being named as an additional insured, implementing an automated COI tracking system, and tailoring insurance requirements to specific project or property risks.
Maintaining thorough records, using standardized forms, and considering higher limits for high-risk activities are essential for comprehensive real estate operations risk management.
COI Best Practices for Property Managers & Landlords
Require COIs from all contractors and tenants.
As a property manager or landlord, you should always obtain COIs from any contractors, subcontractors, or tenants before permitting them to begin work or occupy one of your properties. That’s rule number one for prudent real estate investing. This shifts potential liability away from you to the party actually performing the work or occupying your property, thus protecting your assets and reducing your exposure to financial losses.
Plus, it’s a legal requirement in many jurisdictions. Retaining an up-to-date COI helps avoid the headaches stemming from legal issues. Demanding a COI guarantees funds will be available to cover potential damages, injuries, or losses, reducing the risk of your contractor or tenant being unable to pay.
Verify all coverage details.
Carefully examine every aspect of their coverage, confirming the insurance type and limit meet your requirements.
Many liability issues and financial risks in real estate and construction stem from inadequate or lapsed insurance coverage. By meticulously checking the coverage types, limits, and policy dates, you can confirm the contractor, tenant, or other party has the appropriate insurance to cover potential damages or accidents related to their work or occupancy.
Make sure you’re named as the “additional insured” on your contractor’s or tenant’s policy.
This provides you with direct coverage under their policy for claims. For instance, if a lawsuit is filed against you due to an incident involving the contractor or tenant, your interests will be protected by the insured's policy. This extra layer of protection can be vital in mitigating devastating financial risks and worrisome legal threats.
This key risk transfer mechanism also significantly reduces the likelihood of out-of-pocket expenses or claims against your insurance policy.
Maintain an automated COI tracking system.
Implementing automated COI tracking software to monitor certificate expiration dates shrinks your administrative burden significantly.
You no longer have to set personal reminders to follow up with tenants or contractors to obtain renewed certificates before the old ones expire. Without automation, manually tracking numerous certificates with varying expiration dates and policy details becomes mind-numbing and tedious.
And it invites way too much human error into the process.
An automated COI tracking platform sends timely reminders for renewals, flags discrepancies in coverage, and provides a centralized, easily accessible repository of all insurance documents. You’ll enjoy the peace of mind knowing you won’t have to fret over expired or inadequate coverage.
Adjust insurance requirements based on the specific risks associated with each of your projects or properties.
This is simply another way to reduce unnecessary costs.
Different properties and projects come with varying levels of risk depending on factors such as location, property type, tenant use, construction activities, potential hazards, etc. Tailoring insurance requirements to these specific risks means you’ll be sufficiently covered for the most likely and impactful potential issues without over-insuring for highly unlikely scenarios.
However, you’ll have to exercise personal judgment regarding what strikes the proper balance between comprehensive protection and cost-effectiveness. It all depends on how risk-averse you are.
Consider implementing higher limits for high-risk activities.
If you have contractors performing high-risk work or tenants in valuable properties, consider requiring higher insurance limits. This deepens your level of financial protection against potentially catastrophic losses.
High-risk activities, such as major renovations, hazardous material handling, or properties in disaster-prone areas, carry a greater likelihood of severe accidents or damages that could easily exceed standard insurance limits. Again, implementing higher limits for high-risk activities hinges on your tolerance for exposure to legal or financial hazards.
By requiring higher coverage limits, you ensure sufficient funds are available to cover extensive property damage, costly legal fees, or substantial liability claims that might arise from precarious endeavors.
Use standardized COI forms.
Industry-standard certificate forms (such as ACORD 25) give you consistency and completeness of information. An automated COI tracking company worth its weight in gold will offer these from among a suite of industry-specific COI templates. To be sure, this isn’t an aspect of real estate where you want to get creative.
Don’t forget to maintain files.
It’s considered best practice to keep COI records on file for at least the duration of the statute of limitations for potential claims within your jurisdiction. This is essential in case of future claims or legal disputes.
If a claim arises related to a contractor's work or a tenant's occupancy, even years after the fact, having the relevant certificate at your disposal proves proper insurance was in place at the time of an alleged incident. This documentation can be critical in defending against lawsuits, supporting your own insurance claims, or seeking indemnification from the responsible party.
Why You Should Implement Automated COI Tracking Software
Adopting all of these best practices requires new processes and some additional time—especially when you manage several real estate properties. With help from an automated COI tracking solution, you can simplify much of the work.
bcs is the national leader in automated COI tracking and vendor compliance management. With bcs’ easy-to-use platform, you’ll benefit from cutting-edge features, such as:
- Instant feedback on newly updated COIs
- US-based customer service with real people, not AI bots
- Automated requests for proposal, simplifying the entire RFP process
- Enterprise-level SSO capabilities with location-based access
- Full policy review including endorsements, lease abstractions, and New York Labor Law
- Full-service and self-service solutions to suit your specific needs
- US-based auditors fluent in English, Fresh, Portuguese, and Spanish
- Extensive visibility and analytics tools to monitor and access compliance
The most sophisticated contract, lease, or loan agreements won’t protect your organization without compliant insurance. bcs’ COI tracking software effortlessly manages compliance and streamlines your vendor onboarding process, so you can focus on the other aspects of your business.
Contact us today or schedule a demo to enhance and streamline your certificate of insurance tracking workflows with confidence.
Leave a comment