5 Tips to Help You Buy Real Estate Agent E&O Insurance

You need to buy real estate agent E&O insurance, but that’s not as sexy as selling a beachfront property. As a busy real estate professional, you want to be tracking down your next awesome listing, helping existing clients realize their dream property, or helping a business secure better facilities. You don’t want to be chasing down E&O insurance quotes.

Like so many professionals, you want to focus on the areas of your business that you’re passionate about. This means you’re likely most focused on helping your clients, and building your business. You are not always focused on how to buy real estate agent e&o insurance protection.

But insurance protection is a foundational item to all successful businesses, and it’s immensely more important in professional services, like real estate.

Real estate agencies and brokerages, like other professional services, have additional exposure, and that is the error or omission of critical advice or consolation that may cause damages to others. This doesn’t need to be intentional, or malicious, sometimes it’s just a simple oversight, but it can be devastating to your business if you don’t have the right protection.

So, while it isn’t as cool as getting a million-dollar listing, it’s important so you can assure yourself that a mistake while selling that million-dollar listing doesn’t result in financial devastation.

To make it just a bit easier, we’ve put together these 5-tips for selecting the right real estate agent E&O Insurance policy for you:

Find the right insurance agent

There are many insurance agents out there who have access to E&O Insurance programs, but Real Estate is a bit of a specialized area of expertise. You want to select an insurance professional who understands your business, the processes and procedures of the real estate transaction, and the needs of the real estate professional.

You also want to work with an insurance agent who has access to multiple markets, and Real Estate agent E&O Insurance specific programs.

It may also be good to work with an insurance agent who has more broad commercial insurance experience, as they can often help you with your general liability, commercial auto insurance, or other indemnity products required by your business.

Selecting the right policy for your services and your industry

If your practice is exclusively commercial real estate, then you don’t want to select a program that is for residential Real Estate Agents … that wouldn’t make good sense. But it’s more than just the practice areas.

Real estate is specialized, and it requires a policy form that is designed to handle the unique transactions you handle on a monthly basis, this then requires a specific real estate E&O insurance form.

You need to make sure that you’re not buying a general Professional Lines policy, one that purports to conform to all professional services. These types of policy forms often are inadequate for all transactions a Real Estate Agent conducts, or for some of the processes and practices of a real estate professional.

You need a policy that will cover properties owned and sold by the Real Estate Agent, offers coverage for property management, escrow, or mortgage transactions, or provides lockbox liability.

Be careful to review the coverage areas, the specific endorsements, and the exclusions so that your business practices are protected.

Make sure your prior acts are properly covered

E&O insurance policies provide coverage on a “claims-made” basis, this is very different from what we are familiar with in our auto insurance, where claims are made on an “occurrence” basis.

When policies are written on a “claims-made” basis, it basically means that the insurance company will only provide coverage for claims made during the policy term … regardless of when the loss actually occurred.

In order for your current policy to provide coverage for a claim made, however, your current policy needs to know that there was coverage under some policy at the time of the loss happened. This is controlled by the “prior acts” or “retro” date.

The “prior-acts” date is a fixed date in your current policy that says you’ve had continuous professional liability insurance dating back to a specific time. As long as the loss occurred within the time boundary of the “prior-acts” date, you should have coverage.

You need to be aware of your “prior-acts” date, and make sure that it is present on your new when purchasing a new Real Estate Agent E&O Insurance policy. Don’t purchase only E&O insurance where the prior acts are excluded.

Most important, however, is to not allow any gaps in your Real Estate E&O Insurance coverage as this will likely create a gap in coverage for all transactions conducted prior to your current policy term.

Make sure your policy offers innocent party protection

You may conduct your business with great care and diligence, but others may not. Should a listing real estate agent deliberately fail to disclose important and relevant property information without your knowledge, you would actually be innocent of the error or omission.

However, these types of events still result in claims. You want to make sure that your Real Estate E&O Insurance policy will provide you with a legal defense, and even provide indemnity if needed in the event of the actions of an unscrupulous third party.

Make sure your E&O insurance policy offers ancillary services

Because real estate is a regulated and highly complex market, you need to be abreast of your legal responsibilities. Some Real Estate E&O Insurance policies will offer you free risk management and attorney services. This is of great benefit for mid-sized and small agencies.

Ask your insurance agent if your E&O insurance offers these services. If they don’t, request a quote with a carrier that offers these services at your next renewal. Don’t forget to get a breakdown of what is offered and how you gain access to them.

You’re going to pay premiums for your Real Estate E&O Insurance policy, so it just makes sense to purchase one that will provide you with some benefits beyond the indemnity.

The bottom line

It’s easy to neglect your insurance protection, we all do it. But if you find a dedicated insurance professional, one who will provide you the service and selection to make the right choices, and you apply these 5 tips, you can get a great value on your next Real Estate Agent E&O Insurance policy.