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What Insurance Does a Mortgage Broker Need?

Mortgage Brokers play an important role in real estate transactions. But, as with other professions in real estate, you face many risks in your everyday business. Oversights, errors and omissions, delays or problems with paperwork, contract issues, inaccurate information or even accusations of misrepresentation and negligence can happen. 

That’s why having the right insurance is so important for Mortgage Brokers. Here’s what insurance you need and what you should watch out for if switching insurers. 

What is the Right Insurance for Mortgage Brokers?

A Specialized Mortgage Broker Errors & Omissions (E&O) Policy

Mortgage Brokers should obtain a specialized real estate E&O policy rather than a generic policy ‘off the shelf’. This is because Mortgage Brokers face unique risks which aren’t applicable in other industries. Whether you’ve accidentally certified information as accurate and it turns out to be incorrect, or you’re facing a disgruntled client who claims you recommended an inadequate loan option, a specialized insurance policy will provide a better level of protection than a generic policy. 

Some insurers, like CRES, offer extensive customization of insurance policies. At CRES, we can design your policy to suit the size of your business, the number of brokers you need insured, loan volume — and we’ll ensure all of your specific activities are covered. This means you’ll get the best protection for the best price and have peace of mind that you’re covered. 

Business Owner Policy

Mortgage Brokers should have a Business Owner Policy. CRES Business Owner Policies combine six types of insurance all rolled into one convenient package:

  • General Liability Insurance will protect against injury or property damage. For example, if you visit  clients at their home and someone (other than you) is injured, you would be covered. You would also be covered if you accidentally cause damage to clients’ homes when you visit them. 
  • Buildings and Property Insurance covers repairs to your premises if you experience a fire, theft, or other incidents at your office.
  • Loss of Business Income Insurance can help Mortgage Brokers pay expenses if a claim is preventing you from working in your office. For example, if there’s been a fire at your office with substantial damage, and now the building is unsafe to enter, this coverage would apply. 
  • Equipment Breakdown Coverage covers repairs or replacement of any damaged equipment due to power surges, breakdown, or burnout. Even damage caused by operator error is covered!
  • Personal and Advertising Injury Coverage will help you defend against any claims of copyright infringement, libel or slander. 
  • Medical Payments Coverage will cover medical bills if someone is injured on your property. For example, if a client comes to your office and trips over a cord on the floor and is injured. 

Cyber Liability Insurance

Mortgage Brokers should have a cyber policy to protect against cyber attacks and cyber fraud. Cyber risks are on the increase worldwide and wire transfer fraud is a significant risk to Mortgage Brokers. A specific Cyber Liability insurance policy will keep your mortgage brokering business protected. CRES has access to multiple cyber policies and can help you choose the best value for your money and  circumstances.

Workers’ Compensation 

If you employ staff in your mortgage brokering business, you may need Workers’ Compensation insurance. In the U.S., Workers’ Compensation is regulated by each state, so the laws and penalties differ depending on where you’re operating your business. To find out what Workers’ Compensation insurance requirements are in your location, contact the team at CRES and we can advise you what insurance you need.

Surety Bonds 

Surety Bonds are used across all states to encourage ethical behavior and compliance by Mortgage Brokers. When you purchase your surety bond, you are agreeing to comply with the laws and regulations of your state. 

These bonds are a legal requirement that protects the consumer against harm from your mortgage brokering business. If your client is financially disadvantaged because of misleading information or fraud arising from your mortgage brokering business, they may receive a settlement from  the surety bond company. Mortgage brokers then need to repay the amount back to the bond company. 

What to Watch Out For If Switching Insurers

Look for an A-Rated Insurance Company

When you are insured by an A-rated insurance company, you can be confident that the company is in a strong financial position and isunlikely to close its doors, leaving you in the lurch. This is important because you want your insurer to be around when you need them. CRES insurance policies are backed by A.M. Best A-rated carriers. So, you can be certain that you are in safe hands. 

Ensure You Have Protection against past AND future transactions 

Mortgage Brokers need to protect not just your future transactions, but your past transactions as well. Imagine being sued by a borrower for something that happened two years ago and not having adequate insurance protection in place. 

When you change insurers, some insurance companies will only cover you from the moment you purchase your insurance policy from them. At CRES, as long as you’ve had continuous coverage, we’ll protect your past and future transactions and appraisals (during the policy period). It doesn’t matter which insurer you’re switching from — we’ve got you covered. 

Check Your Eligibility for Insurance

CRES only insures Mortgage Brokers who are:

  • Not direct lenders 
  • Do not offer reverse mortgages
  • Do not offer hard money loans

Did You Hear About the CRES E&O + ClaimPrevent ® Free Legal Advice Hotline?

CRES E&O + ClaimPrevent® offers real estate E&O Insurance tailored for the risks mortgage brokers face. Every policy includes access to expert legal advice via our team of qualified attorneys. This will help you to better manage risks as a Mortgage Broker and prevent lawsuits. 

To find out how CRES can customize an insurance package for your mortgage brokering business, contact us at 800-880-2747 for a confidential discussion. We’re part of one of the largest insurance brokers in the world, so we have access to more options to find you the best protection at the best price.

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