Real Estate Professional Liability Insurance for Agents and Brokers

As a real estate agent or broker, you're not just selling properties, you're also managing complex transactions that involve multiple parties and significant financial stakes. Real estate professional liability insurance can help protect you and your business from costly lawsuits and financial losses.

This type of insurance is also known as errors and omissions insurance, or E&O insurance. It's designed to safeguard against claims of negligence, misrepresentation, or other professional errors that can arise during the course of your work.

In the event of a lawsuit, having real estate professional liability insurance can help cover the costs of defending yourself and paying any resulting damages or settlements. This can be a significant financial burden, and insurance can help mitigate the risk.

Real estate professional liability insurance can be purchased as a standalone policy or as part of a larger business insurance package.

As an individual real estate professional, it's essential to consider errors and omissions (E&O) insurance to protect yourself from potential financial and legal repercussions.

Anyone involved in real estate activities needs real estate agent insurance, including buyer's agents, commercial landlords, and real estate investors. This type of insurance provides coverage for professional liability claims resulting from mistakes, negligence, or omissions made by a broker or agent.

While some states require real estate agents to carry E&O insurance as part of their licensing process, it's not just a requirement for those states. For instance, real estate brokers might be responsible for managing rental properties, working with clients to buy or sell a home, and negotiating real estate transactions, making E&O insurance a must-have.

In fact, 13 states have made E&O insurance a mandatory requirement for agents, including Colorado, Idaho, and Louisiana. However, even in states without a requirement, it's still crucial for agents to consider E&O insurance individually.

If you're an individual real estate professional, here are some key facts to keep in mind:

In the end, E&O insurance is a crucial investment for individual real estate professionals to protect themselves from potential financial and legal repercussions.

Real estate professionals need comprehensive coverage to protect their livelihoods against many common risks facing businesses. This includes coverage for misrepresentation, failure to disclose critical property information, negligence, and even accusations of fraud.

A standard errors and omissions policy usually offers $1,000,000 in coverage per claim, but higher limits are available and recommended when warranted.

Real estate professionals need to know what their E&O insurance covers to understand its value. This type of insurance is designed to protect against losses stemming from claims that the agent's work was mistaken, late, or never produced.

Typically, Real Estate E&O Insurance policies provide coverage for the costs related to legal defense and any resulting settlement from the proceeding up to the limits set in the policy. This can include paying to defend agents regardless of the claim's validity.

A standard errors and omissions policy usually offers $1,000,000 in coverage per claim. Higher limits are available and recommended when warranted. This means that agents can choose a policy that fits their specific needs and budget.

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Some common examples of claims that E&O insurance covers include misrepresentation, failure to disclose critical property information, negligence, and even accusations of fraud. These types of claims can be costly and time-consuming to resolve, but with E&O insurance, agents can rest assured that they are protected.

Here are some examples of what E&O insurance typically covers:

It's worth noting that brokerages will typically carry E&O insurance that covers the entire team from any professional errors.

Real estate agents need comprehensive coverage to protect their livelihoods against many common risks facing businesses. Real Estate E&O Insurance Programs encompass more than just liability insurance.

Professional agents require coverage for common risks, such as negligence or oversight in the performance of their work. This type of coverage is essential for their livelihoods.

Almost every policy excludes property developed or constructed by an agent, and sometimes also does not cover transactions if the property was developed by a spouse or an entity related to the agent. This is a critical consideration for agents who buy or sell property.

The best E&O policies will cover both sides of most agent-owned transactions, including the purchase and sale of property. This ensures that agents have the coverage they need.

A standard errors and omissions policy usually offers $1,000,000 in coverage per claim. Higher limits are available and recommended when warranted.

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Real estate professional liability insurance costs vary based on factors like the size of the business and the number of employees. Individual real estate agents and brokers can expect to pay between $500 and $1,000 annually for their E&O insurance policy.

The cost for your E&O insurance will vary based on geographic location, with metro areas having higher premiums. Higher coverage limits offer more protection but result in increased premiums.

Firm-wide E&O policies, which cover all agents for all transactions at a given firm, are generally based on a real estate agency's annual gross commission income. Past claims history and coverage endorsements can influence the cost of E&O insurance.

Individual E&O policies usually range from $100 to over $500 annually per agent, while firm E&O premiums are generally based on a real estate agency's annual gross commission income.

Here are some estimated costs of real estate E&O insurance:

Opting for a higher deductible usually lowers the insurance premium cost, but agents with more experience and a clean claims record can often secure lower premiums.

Almost all professional liability policies will cover defense costs, but not all policies cover this in the same way.

Some policies include defense costs within your limit of liability, meaning you will have less coverage to cover a settlement.

Other E&O policies will provide a separate limit of coverage for defense costs, which can be a more comprehensive approach.

Failure to disclose previous water damage is by far the most common claim our team sees every year, and it's generally avoidable by simply helping your buyers remember any water damage they might not otherwise report.

The second most common claims our team sees is failure to properly advise whether a home is on city sewer or septic.

Real Estate transactions involve complex legal agreements and significant financial amounts, making disputes arise and clients hold the brokerage firm accountable for perceived errors and omissions.

Properly written Professional Liability insurance covers legal expenses, settlements, or judgments resulting from lawsuits alleging professional negligence, misrepresentation, or breach of duty.

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To file a claim under your E&O insurance, follow these steps:

Large residential firms, property managers, REO specialists, and foreclosure exposures are all potential targets of errors and omissions (E&O) claims.

Real estate professionals, including commercial and residential agents and brokers, property managers, mortgage bankers and brokers, title agents, and escrow agents, all require E&O insurance to protect themselves against mistakes and oversights.

Some common exposures and risks include owned property, discrimination, environmental hazards and pollution, leasing activities, and property management, among others.

Here are some specific areas where real estate professionals may be at risk:

Professional mistakes are an inevitable part of doing business in the real estate industry. Mistakes can happen due to the complexities of real estate transactions with many participants, increasing the odds of a mistake that causes a buyer to suffer a loss and then file a lawsuit blaming the agent.

According to the article, mistakes can arise from a failure to adhere to professional standards or negligence in disclosing property conditions. For example, a buyer may sue an agent after finding black mold, termites, structural damage, or water in the basement.

A mistake can also be a result of a property's correct square footage being misrepresented, or exaggeration of the features of a property. Additionally, using altered photos obtained from third parties, such as online or MLS listings, without checking their accuracy or verifying information supplied by the owner can also lead to claims of misrepresentation.

To avoid costly lawsuits, it's essential to understand the potential risks and take steps to mitigate them. This includes having the right insurance coverage in place, such as Real Estate E&O insurance, which can protect agents from personal liability not shielded by an LLC or Corporation.

Here are some common mistakes that can lead to claims against real estate agents:

By being aware of these potential mistakes and taking steps to prevent them, real estate agents can reduce their risk of being sued and protect their clients' interests.

Bodily Injury & Property Damage is a significant exposure for real estate agents, and it's essential to understand the risks involved. Most real estate E and O policies have broad exclusions for Contingent Bodily Injury & Property Damage (BI/PD).

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If someone is injured while showing a house, or if a buyer gets sick due to undisclosed mold in a home, you may have no E&O coverage. This exposure applies to every single real estate agent, regardless of whether their E&O policy covers it or not.

The Insurance Journal explains that this is a multi-industry insurance issue, making E&O insurance essential for coverage against bodily injury claims. Some policies may have limited coverage for BI/PD, or only cover up to a lower limit.

You'll often see coverage for bodily injury/property damage if the claim is at an open house or if the agent used a lock box. However, the best E&O policies provide full limits of coverage for a broad array of bodily injury or property damage claims.

Curious to learn more? Check out: Agency Errors and Omissions Insurance

Copyright, trademark, and TCPA violations are common exposures in the real estate industry.

Many real estate errors and omissions policies do not cover these types of violations.

The vast majority of these policies do not include coverage for copyright, trademark, or TCPA violations.

At least some insurance companies, such as those FirmSecured works with, offer these coverages.

Copyright infringement on listing photos is a not uncommon issue, as highlighted by the National Association of Realtors.

Many cyber insurance policies contain some coverages for copyright issues.

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