February 22, 2012
Errors and omissions insurance is a professional liability insurance that protects real estate sales associates and firms against litigation involving real estate transactions. With increased potential for lawsuits, real estate E&O insurance pays claims, which are due to error, omission or negligence on the part of the real estate agent.
The process of closing is one of the most crucial aspects of a real estate transaction. But when a sale falls through, the buyers or sellers often hold the real estate agent responsible. Not only are there the legal expenses associated with fighting the lawsuit, an agent’s professional reputation can be damaged.
Premium rates for real estate E&O insurance vary depending on the types of coverage, amount of deductibles and claim limits. Generally, most policies provide coverage only on claims made during the period of the policy. It doesn’t matter when the act in question occurred. Many policies specifically exclude all prior acts from coverage. However, if you are willing to pay for more coverage, some policies are tailored to cover acts that occurred within a specified time frame before a policy goes into effect. Before changing insurance carriers, check the date for when the old policy expires and the new policy takes effect so that you don’t find yourself facing a lapse in coverage.
Most insurance programs offer E&O coverage for both real estate companies and individual real estate agents. Company policies cover the broker-owner, real estate brokers and agents on staff, office personnel and appraisers or other independent contractors who perform duties for the agency. Policies for individual agents are usually transferable so that an agent can keep coverage when moving from one real estate agency to another.
When choosing a policy, verify that the insurance carrier offers coverage for all the services your real estate company provides to its clients. Keep in mind that real estate appraiser errors and omissions insurance plan is different from agent or broker policy. Innocent party protection is another factor to consider. This protects the real estate agency in the event a listing agent deliberately fails to disclose information, but the agency is unaware of the agent’s actions. For these reasons, it pays to work with an insurance agent who has experience in selling policies for both real estate and malpractice insurance.