A real estate agent insurance can be very helpful whether you’re working individually or are part of a brokerage. Professional liability insurance, however, can be expensive, especially if you don’t make smart decisions.
Here, we go through the steps you should follow to ensure that you get the appropriate real estate agent insurance.
1. Understand your professional needs & risks
Every business has its own set of risks and protection needs that other businesses don’t have. With real estate, the risks can cover a variety of tangible and intangible issues, such as selling a house with damage to offering sale advice that doesn’t yield the desired results.
One way to reduce your real estate agent insurance expenses is to identify all those risks that are unique to your job and find a policy that provides adequate protection. This way, you won’t end up spending on something you don’t want or need.
2. Compare terms & rates from different E&O insurance providers
There are a lot of companies that provide professional liability insurance for real estate agents and realtors. But each policy offers different terms and at different rates. To ensure you get a good deal, remember to compare the terms and rates of multiple insurance policies and providers.
3. Look for policies that specialize in your industry
A policy provider who inherently understands the risks involved in your specific industry will be better placed to provide the right coverage. A generic professional liability or business liability insurance may not give you the protection you require. Any money you invest in such a generic policy might be a wasted expense in the long run.
So, when vetting professional insurance policies, ask if the provider offers specialized policies for the real estate industry. You should also check if they have bespoke policies for residential, commercial, and industrial real estate as well or not.
5. Examine policies that bundle multiple coverage
As a real estate agent, you’ll need to take multiple insurance policies to ensure that you’re not caught unawares by any type of professional risk.
In addition to real estate insurance, you’ll also need to take general liability insurance, which indemnifies you against any general claims or lawsuits that occur during the course of the business and not as a result of any real estate service you provide. You may also require a Business Owner’s Policy, which is excellent insurance to have if you start a real estate agency/brokerage and need small business liability protection.
Individually, all three insurance policies can be expensive. However, bundled insurance policies offer multiple coverage in a single budget-friendly package.
6. Maintain a spotless claim history
When policy providers give you a quote for the E&O policy you want, they check your claim history to determine the terms and rates. If they find that you regularly make insurance claims, they increase the premiums charged to mitigate their own risk.
One fool-proof way to reduce your insurance costs is to limit the number of professional liability insurance claims you make. So, be very careful while you discharge your duty as a real estate agent or realtor and reduce your exposure to lawsuits.
Additionally, it helps if you have a good credit rating. A high rating (rating of 800 & above is the best rating, although 740 & above is considered a good rating as well) indicates how financially responsible you are as a brokerage owner or realtor. This can put the provider at ease and reduce your premiums.
7. Limit your risk on the job
The only way to maintain a spotless claim history is to limit your risk to lawsuits. Some ways to do this are:
- Get all listed properties properly evaluated to avoid any negative surprises.
- Get all information about listed properties from the sellers before they hit the market.
- Undertake thorough proof-of-funds check and background verification of the buyer before starting negotiations.
- Check with staff to monitor their activities and keep everything in line.
- Document every single activity you do on the job.
- Document every communication between you and the client.
When you’re aware of the potential risks involved, you can actively work to prevent or manage them, reducing your vulnerability to risks and lawsuits.
8. Update your policy annually so that you benefit from the best terms
A very important step that real estate agents, realtors, and brokers need to do when renewing their real estate professional liability insurance is to check with the provider if there are any better terms available for the new cycle.
Often, policy providers enhance the coverage or provide better terms based on buyer requirements and business trends. By not asking them about new/updated policy terms, you may be foregoing several benefits and paying more than you need to.