Real estate is a complex industry. In addition to regularly dealing with expensive properties, real estate professionals also have to handle sensitive data, including legal documents and personal information, among many other things. That being said, there is a great possibility for error (real or perceived) for real estate professionals and firms. This can lead to strenuous and expensive situations if a client takes legal action against you.
Even if you do nothing wrong, there is no surefire way to avoid a lawsuit in the real estate industry. This is where Errors and Omissions (E&O) Insurance comes in. As the name suggests, it will protect your business from errors and/or omissions that may have occurred on your part during the course of your relationship with a client.
As with all other forms of insurance, not all E&O solutions are the same. To make sure that you find the right policy to suit your needs, make sure to ask your broker the following questions:
What exactly will be covered in my E&O Insurance policy?
First and foremost, you need to make sure that you are covered for something that could actually happen to you or your real estate firm—and that you aren’t paying for something that would never happen. That being said, the following things should all be covered under your E&O policy:
- Slander of a rival agent or business
- Inaccurate market assessment
- Misinterpreted data
- Clerical or contract errors that adversely affect your client
If there is anything else that you would like covered, ask if your broker can work this into your policy.
Who will be covered under my E&O Insurance policy?
If you run a real estate firm, then you need to make sure that both your company and its employees will be covered in the event of a lawsuit. If your employees are not covered, then your business will be significantly disrupted if a client or competitor decides to take legal action against an individual employee.
Also, be sure to distinguish between employees and contractors. Your company could be held responsible for anyone doing work on your behalf including outside contractors.
Will my policy include a “right to defend” or a “right and duty to defend” clause?
Is your insurer always required to defend your business against covered claims? If your policy includes a “right and duty to defend” clause, then your insurer must do everything within their power to protect you. If, on the other hand, your policy only has a “right to defend” clause, then your insurer has the right to deny you certain resources, as they see fit.
Will my E&O Insurance policy provide me with an attorney?
Most E&O Insurance policies cover the cost of an attorney. E&O Insurance carriers typically seek out suitable and experienced attorneys with real estate defense backgrounds. Some carriers will allow you to use your own attorney, but ensure the carrier approves the use of your own counsel BEFORE a claim takes place.
Are you experienced with E&O Insurance for the real estate industry?
What coverages are applicable to your business, what clauses should be included, and what specific resources should be available in an E&O policy will vary greatly from industry to industry. A doctor’s office, for example, will have very different E&O Insurance needs than you will (doctors don’t need to worry about being covered for giving bad real estate market advice!). Make sure that your broker knows what an E&O Insurance policy should cover specifically for the real estate industry to ensure that the coverages, structure, and wording are perfect for your needs.
What are the policy limits for my E&O Insurance?
Very few insurance policies cover an unlimited amount of costs for a claim. In most cases, there are annual policy limits that get segmented based on the type of claim that you end up making. Like any other type of insurance, you can increase or decrease the policy limits, based on how much you are willing and able to pay. Make sure you find out these limits first as opposed to just going with the least expensive available policy.
How much will my E&O policy cost?
Regardless of what insurance coverages you need, you need to make sure that your E&O policy fits within your own budget. To that end, you need to make sure that you have factored in every element of the policy into your upfront and recurring costs.
Although an E&O insurance policy will protect you against the brunt of a legal assault, you probably won’t walk away without paying anything. The first thing that you will have to pay when you make a claim is a deductible. Your deductible should be reasonable and within your firm’s budget.
Ask The Right Questions To Find The Best E&O Insurance For Your Real Estate Firm
Although bad things can happen to a reputable business at any time, you don’t have to let it ruin you. With the right real estate E&O coverage, you can continue running your company without fear that a single legal event will destroy it.
If you have any additional questions about how to obtain the best possible E&O coverage for your real estate business needs, feel free to contact our team of experts at Pearl Insurance.