Even the most diligent real estate professionals may make mistakes that result in expensive disputes. Errors and omissions (E&O) insurance provides coverage against such errors so one mistake won’t derail your career or business.
Professional liability coverage is an indispensable asset for real estate agents and brokers, serving as a safeguard when mistakes lead to legal disputes – be they negligent disclosure issues or simply paperwork mistakes.
Errors and omissions insurance provides protection in an age where clients often take legal action quickly against business professionals, helping cover the costs associated with your defense in court. Similar to malpractice insurance for doctors, this coverage allows businesses to manage client accusations regardless of whether they’re legitimate or frivolous.
Errors and Omissions insurance (E&O insurance) can protect even the most successful real estate professionals should they ever find themselves the subject of legal proceedings, typically covering legal fees and damages due to any allegations of negligence or misconduct in property transactions. It may even be mandatory in some states.
Real estate can be an unpredictable industry, making mistakes inevitable. Mistakes might include forgetting important information about a property’s location – like whether or not it’s near a landfill – or providing misguided advice to clients.
Mistakes made by your staff could result in financial losses for clients that could hold you accountable, and Real estate E&O insurance provides protection from potential liabilities associated with such claims and settlements.
Errors and omissions coverage often includes specific exclusions, such as damage caused by your employees while on the job. Therefore, it’s advisable to review your E&O policy in detail to understand exactly what coverage there is and any restrictions or limitations.
E&O policies in real estate typically follow a “claims-made” structure, meaning they only kick in when claims or suits are being filed against you. So, for instance, if a transaction occurred last November before signing with your current agency and having its E&O policy in place, any lawsuit regarding any alleged errors from this transaction could likely be denied under such policies.
As such, it can be prudent to purchase general liability insurance as an add-on to E&O coverage. This type of policy protects clients’ property while they tour properties as well as injuries sustained during showings; be sure to discuss this issue with your agent or broker to ensure you have enough coverage that meets both your needs and risks. You may even discover ways of lowering E&O premiums through implementing measures which reduce risk, such as having employees take precautionary steps during property tours to prevent harming potential clients.