As a real estate broker, agent or other real estate professional, you work daily with enormous financial transactions. From families using their life savings for a new home purchase or businesses purchasing office buildings – large financial decisions carry with them risk; for this reason e&o real estate insurance should be essential in any real estate professional’s arsenal.
Professional liability coverage commonly known as errors and omissions insurance helps cover legal fees associated with being sued related to real estate work. Usually included as part of a comprehensive business package that protects from risks that might not otherwise be covered, errors and omissions insurance provides vital legal defense against lawsuits if any occur as part of real estate contracts.
Errors and omissions insurance for real estate typically covers damages to clients as a result of mistakes you make while performing your duties, such as failing to disclose foundation issues prior to sale or failing to submit important paperwork on behalf of clients to lenders. Such errors can cost an arm and a leg to defend against and can seriously undermine your reputation in the process.
An expensive claim against you can be devastating, leading to significant income loss or bankruptcy. While your best defense should be due diligence and double-checking all work completed, mistakes sometimes slip through. Errors and omissions coverage provides protection for finances, reputation, and ability to work in the field.
Many states mandate real estate professionals carry professional liability (E&O) insurance; even if your state doesn’t, having it in place demonstrates you are prepared for anything unexpected and committed to keeping your clients protected.
When selecting an E&O policy for your business, take into account its size, frequency of potential lawsuits and state requirements into account. Also make sure that the terms of your coverage – such as its deductible amount and maximum payout amount on claims – are clear before signing on with one policy or purchasing “tail coverage,” which extends its life by an agreed upon number of years after leaving your current employment position.
Most E&O insurance policies are claims-made policies, which means they only cover claims that occur during their term. You should be mindful of any gaps in coverage and how to report them; some insurers also offer “tail” coverage, an additional policy purchased at an additional fee that provides protection for prior acts after you’ve left business, which can be especially useful if your career in real estate involves long-term contracts.