Errors and Omissions (E&O) insurance is a form of professional liability insurance. It helps to protect real estate licensees, appraisers, mortgage brokers, escrow officers, transaction coordinators, and property managers, as well as their companies, against the financial losses that can arise from claims and lawsuits. If you accidentally make an error in the course of your real estate business (or you’re just accused of one) and a claim is made against you, E&O insurance is invaluable. It can pay for defense costs and settlements up to your coverage limits.
States Where Real Estate E&O Insurance is Mandatory
The states where E&O insurance is currently mandatory are listed below. For individual real estate E&O policies, click the link on your state. Details on Company E&O policies in mandatory states are here.
- Colorado
- Idaho
- Iowa
- Kentucky
- Louisiana
- Mississippi
- Montana
- Nebraska
- New Mexico
- North Dakota
- Rhode Island
- South Dakota
- Tennessee
- Wyoming
In these mandatory states, licensees may not conduct real estate business without a current E&O policy. The company, as well as individual licensees, usually need E&O policies.
While it’s not mandatory to take out Errors & Omissions insurance in all states, it offers crucial protection all real estate-related professionals and companies shouldn’t be without
State Group Plans & How They Work
In states where real estate E&O insurance is mandatory, the states will invite insurance carriers to bid on the insurance contract. The winning carrier must accept every real estate licensee and company — regardless of the risk. This is why the cost of the state group plan policy is frequently higher than a CRES policy (CRES doesn’t have to take high-risk clients. It’s just one way we try to keep the costs of our insurance policies affordable.)
Minimum requirements for coverage will likely be different depending on where you’re located. When establishing the minimum requirements, each state may consider:
- The risks involved in real estate transactions in that particular state.
- The potential harm that could result from real estate errors and omissions by licensees.
- State claims and lawsuit data.
- The cost implications of the minimum coverage requirements on real estate professionals.
To make mandatory E&O policies more affordable, a state may choose to provide a relatively low level of coverage. That does mean the minimum coverage set by the state may not adequately protect you if you face a significant claim. That’s one of the reasons why it’s so important to assess your own specific needs when choosing your E&O policy.
Freedom of Choice to Purchase E&O Insurance Elsewhere
Even if you’re in a mandatory state, real estate licensees and other professionals in the real estate industry, as well as companies, can decide to access the state group coverage, OR you are free to choose an E&O policy that best suits your needs.
Individual licensees don’t have to choose the same insurer that your broker uses.
- When selecting a policy in a mandatory state, be sure the coverage meets the minimum requirements of your state.
But the size and complexity of your business, and the types of clients you regularly deal with, will also need to be considered.
As a real estate licensee, you may have coverage via your brokerage. Some brokers may include this for licensees as part of their contract, or you may have to pay for the company E&O policy coverage.
Real estate licensees need to be aware that even if your brokerage does hold E&O insurance for you, there might be limitations, exclusions, or gaps. There is still great benefit in having an individual real estate E&O policy that can be customized to your specific needs. Having a tailored policy puts you in control of your own protection and provides better coverage than a simple, ‘off-the-shelf’ solution.
An individual policy moves with you to ensure your coverage is continuous. And because it’s your own policy, you can choose the activities it covers (like real estate sales, property management, etc.), and you can choose how much coverage you’ll receive in individual coverage areas (the real difference between E&O policies).
These are key reasons why real estate licensees choose to have an individual E&O policy.
The Advantages of Using a Real Estate Industry-specific Insurer
A company like CRES who offers real estate-specific E&O insurance knows how much coverage most real estate licensees will need in specific coverage areas to be protected. That’s why in most mandatory states, the CRES individual policy includes far more per-claim coverage, anywhere from 2 to 40 times the coverage, depending on the state. For example:
Most CRES policies versus the competition*
$100,000 Lockbox Property Damage 20X less coverage
$100,000 Environmental/Pollution/Mold 10X less coverage
$100,000 Escrow disputes (in escrow states) 20X less coverage
$50,000 Cyber coverage for data breach 10X less or not included
$30,000 Subpoena coverage 12X less coverage
$20,000 – $50,000 Disciplinary hearings 8X less coverage
Agent-Owned Property Sales (rentals to four-plex) Extra Fee
Conformity coverage Extra Fee
(meets E&O requirements of other states where you’re licensed)
And with CRES, real estate companies can get up to $3 million in total coverage.
All CRES E&O + ClaimPrevent® policies give you access to expert real estate attorneys to help you prevent claims. You can ask questions, have your attorney review contracts or documents, write letters, or advise you — all included pre-claim! We help you be proactive about avoiding lawsuits and legal problems in your real estate business. (Other policies won’t help you until you have a claim.)
Towards Better Protection For Your Real Estate Business
CRES has been protecting real estate professionals for more than 25 years. We can offer you more coverage in individual coverage areas compared with other E&O insurance providers. And, in many cases, we can do this for less cost than our competitors.
CRES can also provide a range of other insurance and services, including:
- Business Owner’s Policies, Comprehensive Cyber Liability, and Worker’s Compensation Policies for companies
- Surety Bonds for Mortgage Brokers and Escrow
- Seller’s Protection Plans (to help real estate licensees attract new listings)
- Home Warranties
As part of one of the largest insurance brokers in the world, CRES has access to more real estate E&O and other insurance options than just about anyone. Let us help you find the right policy at the right price.
See also our Ultimate Guide to Understanding Real Estate Errors and Omissions Insurance
Contact CRES today for a confidential conversation about your insurance and how you can better protect your real estate business. Our friendly team can customize a policy just for you, so you’ll have peace of mind that you’ll be covered if ever faced with a claim or lawsuit.
Call us at 800-880-2747 today.
*Comparison based on base policy cost for licensees performing activities requiring a license. Read each policy for a full comparison of coverage and benefits. Certain restrictions apply. All coverage is subject to Underwriting and other qualifications.
