How Much Does Errors & Omissions (E&O) Insurance Cost?

We know that price is a large, if not the largest, factor in purchasing E&O insurance, so we want you to have at least a rough idea of the type of expense you’re looking at as well as what factors contribute to your premium.

The average yearly cost for E&O insurance for real estate professionals is $665 with an average monthly cost of $55.¹ Of course, this is an average. Your personal E&O cost could be higher or lower than this average depending on multiple factors.

What factors affect my E&O premium?

If you’re anything like most people, you probably believe or have been told that insurance is expensive and that insurance companies are just jacking up rates to increase their profits. However, there are real reasons behind price fluctuations and factors that affect your premium.

Gross Commission Income (GCI), specifically the past 12 months of income you generated and transactions you made, is one of the main factors used to calculate your E&O insurance premium. If you are making larger sales and transactions, your GCI will increase due to the larger commission. These large transactions carry more risk and complications with them.

Increased Revenues = Increased Exposure = Increased E&O Premiums

The types of transactions you make also impact your premium. A commercial transaction or high-value home sale can be more involved than a typical residential transaction. These transactions can become complicated, and the more complex the transaction, the higher the risk. The higher the value of the transaction, the larger the claim demands could be. Since residential transactions are less complicated and possibly of lower value, they carry less risk.

Another premium factor is your firm’s specialties. If your firm has a lot of non-residential business, your premium will be higher because of the higher risk that comes with commercial transactions. You might even have a commercial specialist within your firm who brings in more commercial business. With any increase in non-residential real estate business, you’ll see movement in your premium.

Are real estate agents required to have E&O insurance?

From one professional to another, if you are any sort of real estate professional, whether you are an appraiser who performs one appraisal a month or a broker who handles hundreds of sales a year, you need E&O insurance. Anyone who provides services to a client for a fee, or even just offers advice, has the potential of being sued.

The answer to this question also depends on which state you work in. For example, the states of Nebraska, North Dakota, New Mexico, Rhode Island, and Texas^* all require real estate agents to have E&O insurance.^** If you work in a state that requires you to carry E&O insurance, be sure to verify that your coverage meets the minimums outlined by your state. Each state requiring E&O insurance has a different coverage limit you must meet.

^*Texas mandates that an agent gets E&O insurance for their business if their sponsoring broker owns less than 10% of their LLC.

^**Make sure to verify whether your state requires you to carry E&O insurance.

How do you know if it’s worth it to pay for an E&O policy?

One question to ask yourself is: “Can I honestly say I will never be sued by a client?”

You can never know for sure that you won’t be sued by a client. Even the smallest mistake can lead to a lawsuit. You have to personally decide how much you’re willing to pay on a monthly and yearly basis, but the bottom line is that E&O insurance could keep you from losing everything in court. That seems worth it.

Is Pearl Insurance always the best fit for an E&O insurance policy?

In many cases, Pearl Insurance is the best fit for a firm’s E&O policy because we work hard to find you the best coverage at the most competitive price possible. We do encourage you to do the research, weigh your options, and make an informed decision about what is best for your firm’s specific needs.

If our coverages match what you’re looking for and you like our price, we would be a great fit. If you’re looking for a program that will give you access to a monthly Risk Management newsletter to help you learn how to better protect your business and reduce your risk, we would be a great fit. If you’re a stable, solid, and ethical realtor and feel Pearl has your program of choice, we would be a great fit.

The price of an E&O policy with Pearl Insurance begins at $395 annually, or $33 monthly.^*

On the flip side, if you’re looking for the lowest price on the market, we might not be a great fit. If you’re looking for minimal coverage, we might not be a great fit. Our prices fall into the average for E&O premiums, but we don’t have the least expensive policy out there.

At Pearl, your premium pays for more than just insurance—it also pays for customer service. As an insured with Pearl, you’re assigned to a dedicated sales representative to ensure that you have support and guidance you need throughout this process. This representative is a trusted resource who you can ask questions to, build a relationship with, and who gets to know your firm and its specific needs. Pearl Insurance truly cares about you and your firm through all stages of your business.

^*This premium can increase from $395 annually depending on your firm’s size and operations.

What do I need to provide to get a quote?

Gross commissions for the last 12 months
- Projected 12-month gross commission for new firms
Percentage of the types of transactions conducted
- Residential, commercial, management, etc.
Average value of properties sold
Number of licensed agents—including owners and managers
- Number of agents with professional designations
Year firm was established
Any claims in the past 5 years
Home warranty programs offered