Why Do You Need an Individual Real Estate E&O Policy?
Real estate companies typically have basic E&O insurance. But having your own portable, individual policy will cover gaps that you might not be aware of. And it will give you tools to protect and build your buseness.
Think about it — do you know what your firm’s policy actually covers?
- Do you know where there are gaps that could leave you without coverage on a claim?
- What about when the company exhausts its total E&O coverage for the year — what happens if you have a claim then?
- And would you know if the company decided not to renew their policy, leaving you unprotected for all of your past sales?
What is Real Estate Errors and Omissions Insurance?
E&O insurance was created to reduce the financial risk and protect you should a consumer become dissatisfied after a transaction has occurred. In fact, E&O has become so important that some states require coverage for real estate licensees, appraisers, and mortgage brokers. States requiring E&O coverage for some or all real estate-related activities include: Colorado, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, South Dakota, Tennessee, and Wyoming.
While many real estate-related companies do carry E&O policies, which can extend to cover their agents, brokers, appraisers, etc. — that doesn’t mean you’re fully covered. And that isn’t just risky, it’s dangerous.
Ownership changes happen all the time — what would happen to your prior acts coverage if there was a change in ownership?
One of the more damaging misconceptions about E&O insurance is that all transactions by the agent will be covered, regardless of which firm they took place under, if that firm carried E&O insurance. This is just not true. E&O policies are in the name of the firm, not you. If you move firms, it’s likely that you won’t be covered on your old policy. And your new firm definitely will not pay for claims on transactions that were done elsewhere.
Covered services: is the work you perform even covered?
Coverage is another area that you may not be aware of. Even if a firm carries a million dollar coverage limit, that doesn’t mean that a single individual has access to the entire policy. Limits are shared between everyone. If someone else files a claim, there is less to pay yours. When this happens, you will personally be responsible for the damages of any uncovered portion. A secondary policy can help cover this gap.
Firm Stability
What happens if a firm suddenly has to close its doors? Recently, a firm with 2,200 licensees filed for bankruptcy and had to cancel their E&O policy. Since the policy had already lapsed, licensees could not get coverage for their prior transactions. The licensees that did not have supplemental E&O insurance were left responsible to pay attorney fees and damages for any claims on past transactions that might come through in the future.
Gaps for Common Activities
Even the best company E&O policies often don’t pay extra to cover discrimination, open house and showings liability, and other optional coverage for activities you may regularly perform. These essential business activities can be covered under your own individual E&O policy. If a potential buyer is injured or damages property during an open house, you, not your firm, will be responsible. When purchasing your own E&O insurance, make sure that you’re covered for these activities.
It’s your business. Don’t just rely on someone else to protect it. CRES offers PERSONAL, PORTABLE and PERMANENT coverage for your real estate business — without high premiums. Get your own policy, with your own limits, and all the coverage you need.
New Real Estate E&O Insurance for an Individual
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