Some common risks of your real estate business are:
- Misrepresentation lawsuits
- Conflicts of interest with the client
- Lawsuits due to non-disclosure of information
Why do you need real estate agent insurance?
Real estate agents come into direct contact with their clients. Since clients invest a significant amount on real estate, they can file a legal case on you for any errors on your part. Similarly, as a real estate agency, you deal with many agents under you. You have extended liability towards all your agents. Therefore, a real estate agency needs real estate broker insurance and agents need real estate agent insurance to indemnify themselves against these risks.
Marketwatch stated an example of a lawsuit against a realtor in Chicago for charging more than the set commission rate of 6%. In such cases, commercial real estate insurance companies might help you.
In this article
What policies do you need?
Business Owners Policy (BOP):
A business owners policy protects businesses from loss due to damage in the assets and third-party liabilities. Simply put, BOP is a bundled-up policy consisting of commercial property, business interruption and general liability policy.
A real estate insurance broker will include BOP in your insurance package to provide maximum coverage at minimum price. BOP will cover the following risks for your business:
- Lawsuits filed over loss or property damage of customer
- Copyright infringement
- Damage in business property
Commercial Property Insurance:
Commercial property insurance covers commercial property from damages due to listed perils such as theft, fire, and natural calamities.
If your business owns or leases premises, then commercial property insurance is a must. For example, if your office building catches fire, commercial property insurance will cover your losses.
General Liability Insurance:
General liability insurance protects a business from third party liabilities arising due to operations of the company. The coverages of this insurance include bodily injury, personal damage, and property damage that have occurred in the course of business.
This policy is covered in realtor insurance to protect you from legal fees, or loss due to injury to clients. For example, if a client gets hurt by slipping on a rod at a construction site, this policy will pay for the treatment.
Business Interruption Insurance:
As the name suggests, business interruption insurance helps to cover losses when your business cannot operate, and you lose substantial income due to any unfavourable circumstances.
This policy will cover losses when your agency cannot function due to damage to the property. For example, if your building catches fire and you cannot conduct meetings with clients in the office, this might lead to loss of business income. Business interruption policy will keep you covered in such situations.
Errors and omissions insurance is a specific type of professional liability insurance. This insurance covers you against claims of negligence, wrong advice, or insufficiency. This is one of the most important policies for a realtor.
E&O will cover you from claims of clients that arise from the advice you provide to them.
Real estate E&O insurance is also crucial for real estate brokers. Agencies are liable for the actions of their agents. For example, a client might sue an agent from your company for non-disclosure. You are responsible for getting your agent out of the situation. E&O insurance for realtors comes to your rescue here.
Cyber Liability Insurance:
Cyber liability insurance covers losses rooting from cyber risk. Online data poses a high risk of theft and misuse. This policy is for all businesses that deal with sensitive data online. Cyber liability deals majorly with cybercrime.
A recent study from IBM shows that the real estate companies lose approximately $3.86 million from a single data breach. To indemnify the business from such huge losses, a cyber liability insurance is important.
Standard exclusions from your real estate agent insurance
Real estate agent insurance is designed to provide coverage for specific risks of the business. However, there are certain standard exclusions from the insurance package.
The standard exclusions are:
- Intentional non-disclosure of information related to properties
- Deliberate law-breaking for extra profit –CNN states an example where five law firms filed a lawsuit against the National Association of Realtors and other brokerages for hiking commission percentages.
- Fraudulent acts from the agent’s end which are not insurable as per law.
The usual exclusions from named perils are:
- Theft due to negligence
- Polluted properties
- Computer shutdown
How much does real estate agent insurance cost?
Real estate insurance quotes vary from one real estate business to another. Each realtor has a different policy customized as per needs. Usually, the factors that affect the quotes of insurance for realtors are: