Even if your firm carries amazing real estate E&O insurance, there can still be gaps, limitations and exclusions. These potential gaps vary from firm to firm based on their most common business activities and overall coverage needs. This is why having an individual real estate E&O Policy tailored to your exact activities and history is important. Here’s how to select the right real estate E&O insurance for you:
What is Real Estate E&O Insurance?
Real Estate E&O Insurance reduces financial risk and protects brokers and agents should a consumer become dissatisfied after a transaction has occurred. Real estate E&O insurance covers claims resulting from the following:
- Fraud
- Breach of duty
- Breach of contract
- Negligence
- Open house and showings coverage
- Misrepresentation regarding the condition of the property
- Consumer Protection Act
- Earnest/escrow money dispute
- Misrepresentation regarding flooding or leaks
- Misrepresentation regarding the value of the property
Gaps in Firm Policies That Could Leave You Hanging
Gaps in real estate E&O insurance can occur in multiple ways — leaving your claim only partially covered or not covered at all. Here are just a few potential coverage gaps:
- If the firm you work for has E&O Insurance, but doesn’t renew on their renewal date, any transaction you conduct during that uninsured period of time would be uncovered. And you probably would never know if they didn’t renew, until after a claim hits.
- Your firm’s policy might not include coverage for certain actions like appraisals, open house and showings, or claims resulting from the unpermitted work done on a property. This could leave you unprotected and responsible for covering claims resulting from these areas.
- Your firm’s real estate E&O insurance might not have enough coverage for your claim. A firm policy has limits to what their policy will payout during the policy term. If they have had to cover other claims prior to yours there may not be enough coverage for your claim, leaving you to cover the balance.
What If You Move Firms or Start Your Own?
To have coverage for prior transactions, you need to maintain continuous E&O coverage — either in your name with an individual E&O policy, or in the name of the same firm with a company E&O policy.
If you move firms, you may not have coverage for transactions that occurred at your prior firm once you leave. If you plan to leave your real estate office or start your own company, best to maintain your own individual real estate E&O policy to ensure continuous coverage.
With your own policy, you can ensure the policy is always renewed on time, and that it covers all of the services you’re involved in.
And Finally…
In terms of risk management and personal business protection, only going with the real estate E&O insurance provided by your firm is relinquishing your control over the protection of your business. Remember, ultimately a firm’s E&O policy is in place to first and foremost protect the firm, not you. This is why having an individual real estate E&O insurance policy is an important step in protecting YOUR business’s future.
Learn more about selecting your own personal real estate E&O insurance policy,
Have you been in a situation where your firm’s E&O policy didn’t fully cover you? Tell us in the comments below!
