Real estate agents are in a pretty lucky position. The business model itself is set up to make generous commissions with very little start-up cash, making real estate a very tempting career for many. However, despite the obvious benefits to becoming a real estate agent, like setting your own hours and avoiding life in a cubicle, there are some special considerations in becoming a real estate agent or starting an office, especially when it comes to insurance policies.
What is E&O?
Just about anyone who interacts with a real estate agent has heard of E&O, or Errors and Omissions. This is a special type of insurance policy that’s just for real estate agents, and addresses issues that are unique to this field. No matter how scrupulous a real estate agent’s attention to detail may be, there’s always a chance of litigation. E&O is designed to help offer another level of protection in this event.
Although policies and coverage vary within E&O, just as they do for every insurance category, there are some basic protections that are pretty typical among most policies.
Most policies will cover the costs of a lawsuit, plus damages (such as loss of work) that may result from such a suit. Claims that are filed due to negligence either from error or omission are the main focus of E&O insurance coverage.
Although “error” and “omission” sound like similar occurrences, the two are considered different in the eyes of the policy. An example of an error would be an incorrect square footage listing in the MLS, without the knowledge of the real estate agent. However, if the real estate agent in question actually knew the accurate square footage of the property, and declined to inform the buyers or correct the data, this would be an omission.
In case of either an error or an omission during the sales process, the buyer has the right to sue the agent or the entire real estate office. Offering protection against this possibility is exactly where E&O comes in.
In addition to getting E&O coverage, don’t neglect the basic small business insurance coverage that you’ll need, especially if you’re working out of a physical office rather than from home. Property insurance can protect you against physical damage to your office space or building, while liability insurance will grant you coverage in case someone has an accident while on or in your property. Small business insurance can also give you protection for the vehicle you use to show prospective buyers to new homes, or to special equipment you use, like your computer and printer.
The most important thing to keep in mind when shopping for small business insurance is not to neglect the special aspects of your business that need a little extra protection. For a real estate agent, this means taking a hard look at errors and omissions.