What Insurance Coverage Do I Need When Starting My Own Real Estate Firm?
Are you a real estate professional who is thinking about creating or beginning to start your own real estate firm? If so, what an exciting journey you’re about to take! But even if you’re over the moon about your next steps, you’ve probably considered all the possible things that could go wrong.
Real estate is all about taking risks. However, you want to protect yourself and your firm if a risk doesn’t turn out in your favor.
There are so many different components that make up the real estate business. From working in a brick-and-mortar building, transporting clients to and from showings, assisting clients with buying and selling homes, and more, real estate professionals need to make sure they’re fully protected.
What are the typical risks and claims involved in the real estate business?
Working as a real estate agent or broker comes with an inherent amount of legal risk.1 The professional liability exposures along with the regular business exposures could make them vulnerable to lawsuits and other liabilities including:2
- Employee injuries
- Failure to provide proper advice
- Customer slips and falls
- Negligence in advertising and promotions
- Errors made in the preparation of offers and sales contracts for customers
- Failure to accurately predict market trends that causes a financial loss to a client
- Negligence in adhering to federal, state, and local real estate laws and regulations
With so many risks involved in the real estate business, you need to make sure you have full coverage to protect yourself from any possible claim situations.
What insurance policies should I consider getting for my real estate firm?
Selling a property is such an intricate process with multiple moving parts involved. To protect yourself, real estate professionals need to manage common business risks such as customer slip and falls as well as risks specific to the real estate profession such as agent error, data loss, or a system breach.2
When looking at insurance coverages, real estate professionals should consider:
- Business Owners’ Policy (BOP)
- Errors and Omissions (E&O) insurance—aka Professional Liability insurance
- Cyber insurance
Business Owners’ Policy (BOP)
A BOP typically comes with General Liability insurance, Commercial Property insurance, and Business Income.2 This bundle of coverages is built to meet your firm’s specific needs.
- General Liability—covers claims such as slip and falls
- Commercial Property—covers your interest in your owned building or tenant improvements for a rented building as well as the contents of your office (i.e., furniture, fixtures, computers)
- Business Income—helps keep you in business following a loss or disaster by replacing income lost due to a fire, severe weather, or other covered event
- Hired & Non-Owned Auto—an endorsement added to a BOP covers vehicles not owned by your company but that are used for your business3
This kind of package helps cover you for general lawsuits most business owners can face.1 The aforementioned E&O insurance covers you for the specific risks involved in the real estate business.
Keep in mind, however, that BOPs typically don’t cover professional negligence such as failing to do something when performing professional services.1 That’s where Errors and Omissions (E&O) insurance comes into play.
Errors and Omissions (E&O) Insurance
This type of insurance is also called professional liability insurance. Any errors or omissions on the part of your firm could result in financial loss to your clients.
This coverage helps protect you for the professional real estate services you provide that may cause your client to suffer a financial loss.2In the real estate profession, there are many instances where errors and omissions can occur and lead to a lawsuit. You need to be protected in the event that a claim goes to court.
All E&O policies are different, so when you’re shopping around for coverage, make sure to get a good idea of who and what is covered and under which conditions you are covered. However, it’s important to be aware that most policies provide coverage only for negligent, non-intentional acts and not deliberate, knowing, or intentional acts.1
To learn more about what E&O policies have to offer, check out our blog that dives into what E&O policies typically covers.
Cyber Insurance
Cyber attacks are becoming more and more prevalent. And with the US real estate market being worth approximately $226.8 billion in 2022,4 it’s a prime target for cybercriminals.
It’s essential to protect yourself and your business from the real dangers of cybercrime whether your firm is large or small. If your clients’ information is mostly stored online, even a simple mistake or breach could cost you thousands or even millions of dollars.
Cyber insurance helps protect your business from the immediate and long-term issues that come with a cyber attack. If you want to learn more about cyber insurance, check out our blog that goes in depth on the different coverages provided and how to protect yourself.
Are there ways to protect myself and my firm other than insurance?
Insurance is absolutely essential to protect your business. However, there are protective measures you can put in place that can help prevent claims.
The single greatest liability most real estate professionals face are malpractice lawsuits by dissatisfied buyers or sellers.1 E&O insurance can help offset these claims, but preventing them in the first place is even better.
That’s why Pearl Insurance offers a large library of risk management materials. These materials were created to help reduce your risk of a claim and learn more about your policy coverage.
What can Pearl Insurance offer me?
Whether you’re an experienced real estate professional or one who is just starting out, Pearl Insurance walks you through the entire process of getting insurance and is there for you afterwards as well. We will not only work tirelessly to help you find a policy to fit your firm’s exact needs but will do everything we can to protect your business.
Want to know more? Find out for yourself.
(800) 447-4982 | pearlinsurance.com/EO-coverage
1“What Are Real Estate Agents Insurance Requirements?” MileIQ, 6 May 2019.
2“Real Estate Business Insurance.” Insurance Advisor, 2023.
3“What is Hired and Non-Owned Coverage?” Insured and More, 3 September 2022.
4“5 Cyber Security Tips for Real Estate Agents.” Realty Biz News, 24 October 2022.
