Errors and Omissions Insurance for Real Estate Agents
As a real estate agent, you must be careful to avoid situations that could result in accusations that you made mistakes during negotiations with a buyer or seller. If someone were to file a lawsuit against you, chances are they may also file a complaint with the state real estate commission, which could result in having your license suspended.
Errors and omissions insurance for real estate agents is designed to protect you against financial losses from lawsuits filed as a result of your work in the real estate profession. Called E&O for short, this is a type of malpractice insurance coverage for real estate professionals.
You should realize that no matter how carefully you do your job you are constantly at risk, even from lawsuits filed against you that may be unfounded or frivolous. Also understand that legal expenses must be paid no matter who wins in court, and those costs can obviously be devastating to your finances, particularly if you own a small firm.
How to protect against E&O claims
First, you should keep accurate records of all transactions. Keep records of whether the buyer chose to purchase or forego home warranty protection. Also note if a buyer decides not to do a home inspection against your recommendations.
It’s not uncommon to ask your buyer to sign a statement that you recommended a specific action. This way, if they later complain that certain appliances don’t work on the day he or she moves in, your files contain the signed waiver, and therefore it’s no longer an issue that you need to address. Document as many facts as possible during your real estate transactions. It could help you later if your client becomes unhappy about some aspect of the sale.
When you have errors and omissions insurance for real estate agents, the insurance company defends the claim and will pay any settlement or judgment against you up to the limits of liability stated in the policy. Typical E&O coverage will only pay claims that are made during the policy period.
Common e&o exclusions include claims resulting in dishonest or criminal acts by you, claims associated with polluted property, and claims against you if you cause bodily harm or death to another person. Speak to an insurer that knows the business and can help you to make an informed decision on the type of coverage you need.