Errors and Omissions Insurance for Real Estate Agents
By Sadiya Anjum
With more people turning to legal recourse everyday, real estate professionals are easy targets when clients are dissatisfied. Any harm (monetary or otherwise) caused to a client due to negligence on the part of an agent may result in a lawsuit. Reasons may vary from inadequate representation to poor negotiations; dissatisfied clients may just slap you with a lawsuit. It is for undesirable situations like this that Errors and Omissions (E&O) insurance will come to the rescue.
Errors and Omissions insurance is a liability insurance that any individual with a business may acquire. It is for people who deal with advising others, making recommendations, representing others etc. It almost accurately defines the job of a real estate agent. E&O insurance is specifically designed for each profession – inspectors, real estate brokers, teachers, agents, etc. There are several different policies available and you must obtain appropriate coverage.
Litigation can be extremely expensive – it can dent your pocket as well as your reputation. For a costly affair like this, obtaining E&O insurance is a smart idea. A contract with your client may safeguard you to a large extent yet it may not entirely protect you. This insurance can help cover for defense costs as well as any damages you may be asked to pay for after judgment. This depends on the kind and amount of coverage you obtain.
Errors and Omissions insurance will basically cover any claims made due to an error, omission or negligence on your part while you are on the job. However, this insurance will not cover for certain acts such as any criminal or dishonest activity on your part, death or physical injury caused because of you, any damage to property by you etc.
When you obtain this insurance, you may have to pay deductibles. This basically includes a certain sum for defense costs or any damage payments if you have been found guilty. The insurance will cover for you as long as you pay these deductibles. But depending on the company and certain situations, deductibles may be waived or reduced. For instance, settling a case out of court may reduce deductibles.
There are several different kinds of policies, differing in quality and range that are available. You can consider your own situation, speak to colleagues or others who have purchased this insurance and then talk to an insurance agent to determine exactly what kind of coverage you require.
As a thumb rule, you should always document all your transactions with clients. Keeping track of all the facts in your client’s file may prove very useful. Take note especially of your recommendations (such as inspections) that were rejected by the client. Make a written note of it and ask your client to sign a copy.
No matter how careful one is, we can never control another’s thoughts or actions. Get insured so you can protect yourself from false claims or at least from financial blows. We take risks all the time and not many agents think of getting E&O insurance. But when disaster strikes, this insurance can save you from financial disaster.
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