Taking out professional liability insurance is not uncommon for businesses. And while it is only occasionally required, some choose to purchase it anyway. Why? This type of coverage can come in handy if anything goes wrong with a printing press, financial advice, organized event, or a recently sold real estate property.
And while issues like these might not be frequent, there is a solid reason to have specialized protection in place. Let’s face it: any specialist offering services to other companies or individuals can encounter complaints and, in some cases, litigation. So it is only natural for any industry specialists like medical or real estate professionals to purchase E&O insurance.
E&O Insurance Explained
E&O insurance, otherwise known as errors and omissions insurance, offers special protection to its holders. It guarantees that you and your enterprise are safe from specific losses like claims, professional errors, or legal acts that often result in massive legal costs and additional financial damage.
Ultimately, it helps businesses limit and occasionally eliminate potential losses. But the coverage may differ depending on the nature of business, location, and many other factors. Here is how it can be helpful to a real estate business.
What Is Real Estate E&O Insurance?
In a nutshell, it is a financial safety net that allows neutralizing risk by making a potentially heavy loss more or less predictable to a real estate business.
It means that if an unfortunate event like a dispute with a client takes place, the errors and omissions insurance policy can protect real estate brokers and agents from litigation, settlement, or court costs.
How It Works
Purchasing real estate E&O insurance implies entering into a contract with an insurance company. An arrangement like this usually means that an insurance company agrees to do the following:
- Provide you or an enterprise with an attorney;
- Cover court costs or associated legal fees; and
- Provide financial resources for settlements.
But what every real estate professional should keep in mind is that an insurance company is not always obligated to offer loss compensation. Here is what professional liability insurance typically does not cover:
- Malicious, criminal, or fraudulent actions intentionally taken by real estate agents or other industry experts;
- Class action disputes;
- Costs associated with litigation settlements that took place before the policy was purchased;
- Actual or alleged disease, emotional stress, moral damage, or death of a person; or
- Anything else listed as an exclusion in the individual policy.
Despite the advantages of E&O insurance, it is common for real estate agents to neglect this essential protection. Even so, those doing business in several states that require this coverage are expected to take out errors & omissions insurance.
However, real estate agents and other professionals operating in the remaining states often rationalize their decisions in different ways, including the following:
- They are absolutely sure that they cannot make a mistake.
- They believe that their clients will not have a reason to sue them.
- They believe that there is no chance they can misrepresent the current condition of a property.
- They think that even if a dispute takes place, they will be able to reach an agreement and settlement amicably.
In any case, to err is human; and even an exceptionally knowledgeable and skilled agent can occasionally overlook a defect. The same is true of brokers or agents with superior people skills since they can still find themselves dealing with constantly unhappy clients.
That is exactly why purchasing E&O insurance for realtors makes a lot of sense in the modern marketplace. If you wish to do business without putting your professional services in jeopardy and exposing yourself to unnecessary risks, insurance for realtors is what you need.
What Should You Expect From E&O Insurance For Realtors?
#1. Negligence Issue
Regardless of your specialty, there is a chance of being accused of negligence. Brokers and agents, in particular, should be aware of risks associated with the condition of the estate. For instance, failure to notify a buyer about mold issues or termite damage can result in a lawsuit.
Appraisers are no strangers to such issues either. That is why it is common for them to safeguard their practice with the help of appraiser E&O insurance. If an appraiser accidentally or intentionally omits information that could have discouraged clients from buying a house, he can be held liable for RESPA violations or breach of fiduciary obligations.
Just like insurance for realtors, appraiser E&O insurance can assist specialists with legal expenses and any work-related allegations, except for those that took place through no fault of their own.
#2. Professional Mistakes
A work-related error that leads to clients suffering from financial losses can turn out to be a serious issue. For instance, if an agent misstates the property’s square footage, he can end up dealing with legal action.
It has to do with agreed-upon additional repairs, paperwork, or any other promises. If an agent fails to deliver on his promise, E&O insurance for realtors can assist with paying the attorney fees or covering court-related expenses.
How to Find a Cheap E&O Insurance for Real Estate Agents
Purchasing this type of policy requires contacting a local indemnity company and asking for assistance. It might not take just a few minutes, but this is a surefire way to learn about different aspects of the available coverage options and evaluate real estate errors and omissions insurance quotes.
If you want to find out more about the price range and conditions of the available insurance options, contact an indemnity company and then, request and compare real estate errors and omissions insurance quotes.
Do I Need E&O Insurance?
This insurance type can come in handy for anyone providing professional services, including agents, doctors, appraisers, attorneys, brokers, financial planners, or website developers.
But bear in mind that state demands and regulations may vary. In the following states buying this type of policy is obligatory:
Why Is It Essential to Purchase Omissions Insurance?
It is geared towards safeguarding a policyholder from high-profile risks associated with the nature of the business. Ultimately, this type of insurance can be categorized as a universal solution due to its extended use.
Is Omissions Insurance (E&O) Expensive?
The cost of the policy depends on numerous factors like the nature of your business, location, previously settled or denied claims, and much more. However, what you need to factor in is the number of litigation problems you or your company have faced before. If you haven’t had any, the insurance is not likely to be expensive and might have more favorable terms. It means that you might be lucky to find cheap E&O insurance for real estate agents and other professionals.
Victoria is a Senior Content Writer at American REIA. She helps customers find the right educational material through easily-digestible blog posts and buying guides backing their insurance coverage choice. Victoria covers the latest industry news and various insurance topics, including auto, home, health, and life insurance.