Even when providing accurate information to clients and handling property sales, rentals, and purchases with care, the real estate business remains risky. Errors and omissions insurance for real estate agents and brokers is an essential way to protect yourself against these risks; known as Errors & Omissions or E&O insurance – which covers legal costs should a lawsuit arise as a result of your services – is widely offered among financial advisors as well as insurance brokers, but especially important for real estate agents.
Errors or omissions in real estate transactions often arise from providing incorrect property details, misreading contracts or failing to prepare closing documents in accordance with them, leading to lost money for clients or miscommunication about your role within a transaction. Should these errors result in legal expenses being awarded against you as compensation or damages awarded against your clients; an E&O policy provides protection from such litigation expenses as well as compensation awarded through legal settlement.
Mistakes may happen even if you think you’re providing accurate information to clients, and when they do they could cost big. Even small omissions, like forgetting to mention a home’s septic system instead of sewer connection can result in costly disputes; more serious errors — such as inaccurate property descriptions or failure to complete promised repairs — could put your entire career at stake.
As soon as you’re dealing with large sums of money and dealing with stringent regulatory processes, something will go wrong – and when that something turns into a lawsuit, fines and penalties could jeopardize your ability to continue your real estate career or run your business. An E&O policy will cover legal fees as well as damages awarded against you so you can focus on meeting client needs without worry about litigation fees or compensation awards.
Errors and omissions are not typically covered under standard commercial general liability policies, but you can add this type of coverage through an E&O policy or find other professional liability policies to fit your industry. Errors and omissions policies generally vary in price depending on your state’s requirements for real estate professionals, the coverage you require, as well as any claims filed on it. Claims filed can have an effectful price impact as well. Usually, the more costly your claims have been, the higher your premium will be. Some companies provide special rates to new or inexperienced brokers or those with lower claim histories; you should check with your broker to see if this discount applies to them. It should also be noted that certain policies exclude claims related to fraud or dishonesty – this should never be risked so always read carefully any policies you consider before signing anything.