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A Guide to Real Estate Errors and Omissions Insurance

In today’s litigious society, a lawsuit can arise from the most unlikely of circumstances. Doctors, consultants, and a variety of other professionals are constantly under the threat of angry clients, threatening to file a lawsuit. Professionals in the real estate industry are no exception, as individuals are sensitive on the various aspects of purchasing a new property or home. Examples of causes for lawsuits include a error in the described property, or miscellaneous failures in the sold property.

In order to protect themselves, real estate professionals have the option of acquiring errors and omissions insurance. This type of insurance is designed to protect the real estate professional against a claim against their service. Though errors and omissions insurance will not protect the real estate professional from every possible lawsuit, this insurance policy will minimize the damages towards the individual’s finances and reputation.

Why Choose Real Estate Errors and Omissions Insurance?

One of the main reasons why a real estate professional will purchase errors and omissions insurance is to protect their reputation. The real estate agent or agency relies on a measure of trust, with reputation playing a major role in the individual’s success. A frivolous lawsuit can be extremely damaging to the professional’s reputation, as it calls to question the integrity of the professional. Maintaining a trusted reputation is incredibly important to real estate professionals, and should be protected at all costs.  

However, the costs of a frivolous lawsuit damage more than the professional’s reputation. A lawsuit, even on the most trivial of claims, can pose an enormous financial risk to the agency.  In addition, lawsuits are extremely time-consuming, and can take weeks or even months to settle a claim. The financial repercussions of a lawsuit can be damaging, and can even shut down the real estate practice or agency. Therefore, the benefits of errors and omissions insurance greatly outweigh the costs, incurred by a frivolous lawsuit.

What to Consider Before Choosing Errors and Omissions Insurance

Given the importance of professional liability in the real estate industry, purchasing errors and omissions insurance can be a wise investment. However, this decision is not one to be made lightly. Before considering obtaining a quote for a policy, consider the following tips:

Insurance Provider:
When negotiating a policy with an insurance provider, it is important to remember that each policy is different on a case-to –case basis. There is no single policy that fits all cases; instead, the insurance provider and client should work out a policy that best suits the need of the professional. If the insurance provider does not offer a quote or other form of evaluation, the real estate professional is advised to look elsewhere.

Costs:
Given that each errors and omissions insurance policy is different, the costs will also vary. The cost of an insurance policy depends on a number of factors, such as the state, the type of service, and the amount of coverage. In addition, take into account the number of claims that have been filed against the agency.