Professional Liability Insurance for Real Estate Agents: Do You Need It?
It’s an important question: Do real estate agents need professional liability insurance to run their businesses?
As a real estate agent, navigating the complex world of real estate transactions comes with inherent risks. Even a minor oversight or unintentional error can lead to costly lawsuits. Professional liability insurance acts as a crucial shield, protecting you from the financial consequences of alleged negligence, misrepresentation, or failure to disclose vital information.
This article aims to shed light on the importance of this essential coverage and why it should be a top priority for every real estate agent. Join us as we explore who needs the coverage, policy specifics, and potential costs to help you safeguard your career, reputation, and financial well-being in an ever-evolving industry.
What Is Professional Liability Insurance?
Professional Liability insurance provides coverage for claims against businesses that provide professional and personal services within and beyond the real estate profession.
Sometimes referred to as errors and omissions (E&O), professional indemnity, or malpractice insurance, this policy offers you and/or your real estate firm protection from civil lawsuits alleging negligence, common mistakes, omissions, misrepresentation claims, and other circumstances that may result in legal action.
Who Is It For?
Professional liability insurance for real estate agents works for both agents themselves, as well as the larger firms they may work within. Professional Liability is a must-have policy for real estate agents and brokers. This line of work involves a lot of money, personal client information, and emotions. It’s important to protect yourself and your business from any situation you may be walking into, whether it’s someone buying their first home or looking to move.
There is nothing that will stop a dissatisfied client from suing you or your business. However, Professional Liability can stop some of the financial devastation that comes along with a lawsuit.
Why Do You Need It?
Receipts. Proof. Timelines. Screenshots.
In the event of a lawsuit, you’ll need help gathering evidence and defending your case. But you may be thinking, “Hey, I don’t run a reality housewife troll account. I’m a real estate agent — who is going to sue me?”
Lawsuits against real estate agents are common due to myriad things. Some reasons can include:
Alleged failures to disclose defects of a home
Negligent misrepresentations of things like neighborhood safety
Missed disclaimers about things like utility status
Misunderstandings about boundary lines
And more. There really are so many issues that can occur throughout the sale and purchase of a property. Having a Professional Liability policy can help protect real estate agents and firms against losses resulting from unintentional negligence and any errors and omissions. Even if you are not in the wrong, it can also help cover losses incurred from the cost of defending yourself.
What Does Professional Liability Insurance for Real Estate Agents Cover?
Are you still thinking that a lawsuit is highly unlikely to take place in a real estate agents line of work? Have you ever heard of something called buyer’s remorse? How about wrongful discrimination? Did you know that you can even be sued for giving bad advice? Or perhaps you are simply a human being who is capable of making an honest mistake throughout a real estate transaction.
Even if the accusations are groundless and untrue, the claims made and the costs of a lawsuit can hurt your business’ reputation and bottom line. You can be accused of misleading your client or a potential buyer about so many things when overseeing the purchase or sale of a property. As long as the error, omission, or negligence was not done with malice or intent, your Professional Liability plan will cover legal fees including your defense costs. It can also cover any damages that you may be ordered to pay, including settlements reached in or out of court.
What Does Professional Liability Insurance for Real Estate Agents Not Cover?
Professional Liability is a must-have, but it’s not the only policy you should purchase to protect your real estate business because it doesn’t cover everything.
For starters, you’ll also want to get a Business Owners Policy (BOP). A BOP is a foundational policy for business owners because it combines coverages like Commercial Property Insurance, Business Interruption Insurance, and General Liability Insurance.
General Liability will cover things like third-party slip-and-fall injuries, legal fees and defense costs, medical payments, and damages caused by reputational harm. Business Interruption Insurance will help protect you against monetary losses due to periods of suspended operations, and Commercial Property Insurance will protect your business if there are damages to your place of work.
Since you probably spend a lot of your time driving from property to property, you might also want to consider Hired/Non-Owned Auto Coverage, an optional coverage under a BOP that can protect you in the event of an auto accident while traveling for work.
As well, you likely access and potentially store clients’ financial and personal information on the devices you use for work. To avoid risk, you may also want to consider a Cyber Insurance policy to help in the case of a cyber-related security breach or similar events.
If you run your own firm and have employees, you’d also want to consider getting a Workers Compensation policy. You’ll want to know that your employees will be taken care of in an event that may result in injury or illness while they’re at work. The protection is for their well-being of course, but it also helps you avoid a potential lawsuit.
What Does Professional Liability Cost?
Like most insurance policies, the cost of professional liability insurance coverage varies based on the size of your firm, your annual revenue, and your location, location, location.
Just like with the price tag on homes and rental costs on business properties, location will matter when it comes to the overall cost of Professional Liability Insurance for real estate agents. Working within a dense, desirable city can drive the cost of your insurance up much more than working out of a small, quiet town or the suburbs. The idea here is just that there will be less risk in a sleepier suburb.
But remember, just like with real estate, you don’t have to take the first insurance offer that comes your way. While there are some factors that can make your insurance plan more costly, there are also factors that can help bring down the price.
For instance,if you have been in business for some time and have remained claim-free or have a low-claim history, that past experience may give your insurance provider confidence in offering a lower rate.
You can also purchase a package of policies tailored to your needs that can reduce the cost of those policies by reducing overall liability. And you can pay in advance if you have the funds available — most insurers offer discounts if you pay your annual real estate agents insurance costs upfront rather than month-to-month.
Additionally, proper prevention and management for things like cyber threats and having a security consultant on-call can help minimize risks. In return, it may even help you save on coverage. As well, make sure to revisit your coverage annually to ensure you are getting the best deal.
Where Should Real Estate Agents Get Professional Liability Insurance?
It is important to find an insurance provider that understands your type of business and speaks your language. Look for someone who has access to various carriers and policy types so that you can get a competitive rate, and quote quickly and with ease.
You have enough on your to-do list with listings, showings, and hopefully some closings too. Getting Professional Liability insurance shouldn’t take long or eat into any time you could be spending helping your clients get a roof over their heads. It’ll help if your insurance provider is digitally savvy and has an online portal — this will ensure you can access things like your proof of insurance certificate at any time so that paperwork won’t slow you down.
In the dynamic world of real estate where reputations and livelihoods are on the line, Professional Liability insurance is a nonnegotiable investment. It shields you from the devastating consequences of unforeseen mistakes, oversights, and allegations of other negligent acts, allowing you to navigate transactions with confidence. Don’t let a single misstep jeopardize your hard-earned success. Prioritize this essential coverage and partner with an insurance provider who understands the nuances of your profession. Safeguard your business, protect your clients, and secure your future as a real estate agents with the peace of mind that Professional Liability insurance provides.
