Doctors must carry medical malpractice insurance, and similarly, real estate groups urge their members to purchase errors and omissions insurance for real estate agents. This insurance is not to cover cases of outright fraud. Rather, it covers instances in which agents make mistakes–for example, forgetting to tell clients about hidden water damage or not checking to make sure that the size of the property is exactly as advertised.
How It Works
When an agent gets sued, the insurer covers the majority of legal costs, with coverage typically extending to $1 million minus a deductible. The insurer takes care of finding an attorney and helps the agent come to a settlement or shape a defense.
If your annual revenues are less than $500,000, you probably need to pay only about $600 a year. If you make more money or work in an expensive area, you might need to pay more than $1,000 yearly. However, errors and omissions insurance for real estate agents more than pays for itself if you get sued.
Local laws and market variations account for a wealth of differences in errors and omissions insurance coverage. Because of this, comparing policies and checking the fine print can be problematic. Ask lots of questions, and make sure you’re comparing apples with apples whenever possible.