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E&O Insurance for Real Estate Agents and Brokers

By nature of their profession, real estate agents are often involved in complex, high-stakes transactions. Unfortunately, this also makes them vulnerable to litigious individuals. To manage this risk, many real estate agents and realtors are investing in errors and omission insurance (E&O), safeguarding them from debilitating legal expenses and judgments.

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What is real estate agent errors and omissions insurance?

  • Real-estate agent E&O insurance covers losses and expenses generated by client claims of error, omission, or negligence during the listing and sale of a residential or commercial property.
  • Suits against real estate agents and realtors arise for several reasons (including failure to negotiate a sale); however, the most common cause is misrepresentation of a property's physical condition (failure to disclose a roof leak or foundation crack, for example).

Why is agents' E&O insurance necessary?

  • Some states now require real estate agents and realtors to carry errors and omissions insurance.
  • General businessowners policies do not include professional liability insurance, covering losses and legal expenses resulting from client claims of error or negligence.
  • Agents and realtors without E&O insurance are at significant risk. Defending one's business against a lawsuit can be financially and professionally devastating, even if a client's charges are unfounded.

What else should I know?

  • Maintain proper documentation and records. This will significantly aid your defense in the event of a buyer or seller claim.
  • Agents can reduce their liability by requiring sellers to complete a property disclosure form (a requirement in many states) and by having buyers obtain a home warranty and home inspection. (If buyers decline the latter, have them sign a form stating they have refused the inspection.)
  • E&O coverage limits will vary. When shopping for E&O insurance, inquire about the maximum coverage per claim and per year.
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