Errors & Omissions Insurance for Real Estate

Errors and Omissions Insurance at a Glance

An Errors & Omissions insurance policy provides business insurance coverage to protect in the event they are labelled with an accusation of making a mistake. E&O insurance thus protects businesses against claims of negligence, mistakes, inaccuracies, inadequate work, misrepresentation or similar allegations. If your real estate business gets hit with such a claim, you could be facing legal expenses, including attorney fees, court costs, paying for settlements, or court judgments. E&O insurance can cover these costs.

What Does Errors & Omissions Insurance for Real Estate Mean?

Errors and omission insurance for real estate firms, agents, brokers, and firms, help them protect against losses caused due to their professional services. With E&O insurance, the agent or the real estate firm can avoid having to pay legal costs out of their pocket. This insurance pays for claims arising due to negligence, error or omission linked to an agent's duties.

What does Errors & Omissions Insurance for Real Estate Cover?

In general, E& O insurance covers financial losses resulting from error or negligence while delivering professional services. These costs may include reimbursement for lawyer fees, administrative costs, court expenses, settlement costs, etc. resulting in legal action taken against the agent or the firm.

Some common Errors and Omissions insurance policy claims can arise from:

- Errors

- Omissions

- Negligence

- Misrepresentation

- Inaccurate advice

We list down a few examples of claims under real estate errors and omissions insurance

- Failure to obey the rules and laws like permit or registration issues

- Failure to disclose property damage or any environmental attributes of a property

- Failure to advise damage caused due to water or flood damage in the past

- Listing incorrect details about the property like the area, water supply, safety, etc.

- Error in agreement(s) resulting in monetary loss

What are the Common Exclusions in Errors & Omissions Insurance for Real Estate?

An exclusion is a section of a policy that mentions the events for which the insurance company shall not cover the costs. Some of the common exclusions in errors & omissions insurance for real estate include:

- Dishonest or criminal acts by the agent

- False claim about the property that the agent is trying to sell

- Engaging in any kind of fraud during the whole process

- If the agent causes bodily harm to the third-party, or harm to someone else’s property

Conclusion

All professions are businesses are built on trust. But in the real estate industry, trust is the cornerstone of this business. The main reason behind the principal of “trust” is that the buyer of the property is emotionally invested and the transaction value is relatively high. If the client feels this trust is broken, it may lead to an E&O claim. Errors & Omissions insurance for real estate may not be a mandatory requirement by the law, but having sufficient cover is highly recommended by real estate agents, brokers, and firms.