Do I Need Insurance To Be a Real Estate Agent?
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Real estate agent insurance is always recommended due to the industry’s many liability risks stemming from disgruntled clients, competing agents and even new customers entering your office. Coverage options include general liability, business property, professional liability, commercial auto, workers' compensation and more.
Read how much real estate agents insurance costs, as well as steps on how to get coverage.
Are Real Estate Agents Required To Have Insurance?
Workers' compensation may be required coverage for real estate brokers depending on where they operate and if they have employees. Also, agents with company-owned vehicles must have the state's minimum auto coverage before getting on the road. Errors and omissions insurance may also be required as part of the licensing process depending on where you’re located (more on this later).
Real estate agents offer advice, share knowledge, store customer data and may also have employees. Each one of these factors leaves real estate agents open to one claim or another, necessitating the need for financial protection through commercial insurance.
Real Estate Agents vs. Real Estate Brokers
Generally, real estate brokers can either help clients buy and sell property independently or employ real estate agents, while agents will usually work for brokers. Due to this, brokers may have additional insurance requirements and needs such as workers’ compensation insurance and employee benefits liability coverage. An agent is usually covered for liability under the broker’s firm but may need to buy their own coverage in some cases.
What Types of Insurance Do Real Estate Agents Need?
Real estate agent insurance comes in many forms. From general liability to workers' compensation, we've broken down essential coverage for your real estate business.
Business Owners Policy (BOP)
A BOP bundles general liability coverage, business property coverage and potentially business interruption coverage (more on these below) into a single package, typically at a lower cost than purchasing each type of coverage separately. These bundled plans are a convenient and easy way for agents starting new businesses to get financial protection.
General Liability Insurance (GLI)
GLI is often the first line of defense for real estate agents, providing client bodily injury, client property damage and client personal injury protection (copyright infringement, libel and slander). You can rest easy knowing that should someone slip and fall at your place of business, you will be financially protected if you're sued for physical injuries or any personal belongings that may have been damaged.
Commercial Property Insurance
With business property insurance, the physical assets of your real estate business will be protected from sudden and unexpected events such as fire, lightning, hail, theft and vandalism. Covered property usually includes an office space you might be leasing, electronics and even staging furniture. In addition, your carrier may even cover you if important documents, like accounting records, marketing materials and clientele documentation, are destroyed by a covered peril.
Business Interruption Insurance
Business interruption insurance can help cover lost revenue and relocation costs should your real estate business need to close temporarily due to events such as windstorms, riots, theft or a government-mandated shutdown. Depending on your insurer, you could receive financial compensation for up to 12 months.
Professional Liability Insurance
Also called errors and omissions (E&O) insurance, professional liability insurance safeguards you if you're sued due to negligence or improper advice, such as not disclosing to a buyer that you and the seller were aware of the deteriorating roof before the sale closed. If the family sues you after the roof caves in after a storm, this type of policy may help cover your legal defense costs.
States that require this coverage include:
|New Mexico||North Dakota||Rhode Island|
Commercial Auto Insurance
Commercial auto insurance operates virtually the same as individual auto insurance but for your company vehicles; the base coverage being liability insurance as required in most states, with several other insurance available to bolster your protection. Keep in mind that your personal auto policy will not cover accidents that occur while driving your car for business use.
Workers' Compensation Insurance
Any employee unable to work due to a work-related injury or illness will receive wage-replacement and medical benefits. Real estate agents with employees will most likely be mandated to have workers' compensation depending on how many employees they have.
Insurance Add-Ons Worth Considering
The add-ons below will cause the cost of your coverage to rise but they may be worth the extra protection.
- Commercial umbrella insurance: Expands the initial limits of existing liability policies above their original amount once reached due to a claim. For example, if your losses exceed your general liability policy’s $500,000 limit, commercial umbrella insurance would pick up the difference.
- Commercial crime insurance: Protects your real estate business from illegal activities from employees, money theft and computer fraud.
- Cyber liability insurance: Covers costs associated with data breaches and other cyber attacks.
- Employment practices liability: Provides liability coverage for businesses accused of wrongful termination or discrimination by employees.
How Much Does Real Estate Insurance Cost?
Real estate insurance costs will vary since costs can change based on how much coverage you need, your location and the size of your real estate agency. For example, general liability insurance may cost $1,704 per year, while professional liability insurance may cost $2,496 per year. We've collected the average monthly pricing for each type of commercial insurance that may be needed for a real estate agent.5]
How To Get Insurance for Your Real Estate Business
Here are some general steps to obtain insurance for your real estate business:
- Identify your insurance needs: Assess the risks associated with your real estate business, including property damage, liability claims, employee injuries, errors and omissions or other potential hazards. Understanding your needs will help you determine the types of insurance coverage required.
- Research insurance providers: Look for insurance companies that specialize in providing coverage for real estate businesses. Research their reputation, financial stability, customer reviews and the types of insurance policies they offer.
- Determine required insurance coverage: Certain types of insurance may be legally required depending on your business structure, location and activities. As we've mentioned earlier, commercial auto insurance is required in most states. Additionally, workers' compensation insurance may be mandatory if you have employees.
- Consider additional coverage: You can review the insurance options we listed above. Some common types of insurance for real estate businesses include general liability insurance, professional liability (errors and omissions) insurance, business interruption insurance, cyber liability insurance and employment practices liability insurance.
- Obtain multiple quotes: SmartFinancial is the fastest and easiest way to get real estate agent insurance quotes from local carriers. Ensure that the coverage limits, deductibles and terms of the policies are suitable for your business needs.
- Review policy exclusions and terms: Understand what is covered and what is not. Pay attention to policy limits, deductibles and any additional endorsements or riders necessary to address specific risks.
- Consult an attorney: Find a lawyer specializing in insurance or real estate law to ensure adequate coverage and clarify any legal implications associated with the policies you are considering.
- Purchase insurance policies: Once you have selected the insurance provider and policies that meet your needs, complete the necessary paperwork and make the premium payments to secure coverage. Keep a copy of all policy documents and maintain records of your insurance coverage.
- Review and update regularly: Your insurance may change over time, so update your policies as necessary to account for changes in operations, new properties or regulatory requirements.