Real estate brokers play an essential role in helping their clients make one of the biggest investments of their lifetimes, so even in states that don’t require it, all real estate professionals should invest in errors and omissions insurance to safeguard personal assets, maintain professional integrity and prevent costly lawsuits.
Errors and Omissions Insurance
Errors and Omissions, commonly referred to as E&O insurance, is a form of professional liability coverage designed specifically to protect real estate brokers against legal fees, judgements and settlements in the event of a claim being brought against them – similar to malpractice insurance for doctors. E&O coverage has become a common form of business insurance among real estate brokers as well as financial advisors, insurance agents and more.
Although no real estate professional anticipates being sued, mistakes do happen in all industries and while most claims may be frivolous; even one frivolous claim could derail an entire career in real estate. Therefore, all real estate professionals must secure E&O coverage as soon as possible.
Many E&O policies contain two components, known as per-occurrence and aggregate limits. The per-occurrence limit covers an incident while aggregate limit refers to how much will be covered over the term of your policy (usually one year). To ensure you have enough protection from unexpected events when buying errors and omissions insurance for real estate investments, carefully read over each policy’s specific terms and conditions to make an informed decision when buying errors and omissions policies for real estate transactions.
Errors and Omissions Insurance Cost for Real Estate BrokersThe cost of errors and omissions insurance for real estate brokers varies based on factors like size of brokerage, experience level, etc. On average, it costs approximately $55 monthly.
Large agencies typically incur higher rates due to the higher risk they pose; property insurance policy types you carry also play a factor, along with any special protection you need such as environmental liability coverage or worker’s comp.
As soon as you become a real estate agent, it is highly advisable to purchase an errors and omissions insurance policy immediately; your brokerage may require one as part of their sign-up procedure for working together with them. In some instances, an E&O policy will even be included with your monthly desk fee payment to work alongside them.
Errors and omissions in real estate transactions can take many forms, from misrepresenting its features to not disclosing information required by law. You can find the appropriate errors and omissions insurance for real estate here.