Errors and Omissions Insurance for Real Estate AgentsErrors and Omissions, called E&O for short, is the name used to describe a type of malpractice insurance coverage for real estate professionals. The coverage protects against financial losses from lawsuits filed as a result of your work in the real estate profession.
No matter how carefully you do your job, you are at risk, even from lawsuits that may be unfounded or frivolous. Legal expenses must be paid no matter who wins in court, and those costs can be devastating to your finances.
When you have Errors and Omissions coverage, the insurance company defends the claim and pays any settlement or judgment against you up to the limits of liability stated in the policy.
I'm not an insurance professional, so I won't even try to tell you what type of policy you should purchase, but I can give you some very basic ideas about typical coverage.
Typical E&O Coverage
- Pays claims that come about due to error, omission, or negligence in regard to your duties as a real estate agent
- Pays claims that are made during the policy period
Common E&O Exclusions
- Claims resulting in dishonest or criminal acts by you
- Claims associated with polluted property
- Claims against you if you cause bodily harm or death to another person
- Claims arising from damage you cause to someone's property
E&O Liability Limits
- Varies depending on your policy. Ask the agent to explain your options.
DeductiblesThe policy may have two deductibles, the amount of money you must pay before the insurance coverage kicks in. There might be one deductible for defense costs and another for payment of damages if you are found to be at fault.
Protecting YourselfIf someone files a lawsuit against you, chances are they will also file a complaint with your state real estate commission. Keep accurate records of all transactions. What did you talk about on the phone on Monday afternoon, May 5th? What was the buyer or seller's response when you asked if they wanted to purchase home warranty protection? Did a buyer decide not to do a home inspection against your recommendations? Write it down and put it in the file.
It's not uncommon to ask your buyer or seller to sign a statement that you recommended a specific action. The buyer who didn't want a home inspection may come knocking at your door if the air conditioning doesn't work the day he or she moves in. If your files contain the signed waiver, it's not your problem.
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.