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Inspector’s E&O Insurance:
Market Softens- Prices Drop - $1,250!
By David Brauner, Senior Broker OREP (www.orep.org)
Instead of the now familiar direction to “shop ‘till you drop,” new insurance
conditions suggest instead that inspectors should shop because they’ve
dropped. We’re talking about rates for errors and omissions insurance of course.
The market is finally softening back to where it was before 911 and the good
news is that you have more choices than ever– broader coverages and lower
rates.
If you are a single inspector and haven’t shopped for awhile you will be
surprised at the lower premiums now available. Minimum premiums for policies
with very broad coverage including free prior acts, coverage for Referring
Parties, radon, pest, commercial and more, are as low as $1,250 (OREP)!
Multiple-inspector firms also are benefiting from the new market-especially with
programs that don’t charge extra premium for additional inspectors. Here are a
few shopping tips to help you make an informed decision about these and other
issues, such as Occurrence versus Claims Made, preserving
prior acts and more.
Covering Multiple Inspectors: Paying more than you have to?
If you pay “per inspector” to cover your multiple-inspector firm you
are probably paying more than you have to. This also is true if you pay extra
for “corporate coverage,” pest, radon or commercial inspections. If you have
risked not covering every inspector doing work for your firm in the last
few years because the cost became prohibitive, there are programs today (such as
OREP) that will cover all inspectors for one low premium, including independent
contractors.
Simple Rules for Maintaining Prior Acts
If you are reluctant to switch carriers because you are worried about losing
coverage for past inspections, or if you pay more year after year for an
Occurrence policy, believing that this is the only way to preserve prior
coverage, most programs now offer prior acts for free. You can enjoy the lower
rates of a Claims Made policy and preserve your prior acts.
Claims Made provides coverage for claims that
are made and reported during the policy period. What does this mean? It means
that claims are covered for as long as the policy is in force- one year, ten
years or longer, as long as coverage is continuous (no break in
coverage).
Here’s how to avoid a break in coverage and preserve prior acts:
* Don’t let your policy lapse: if you are renewing with your current carrier,
renew on time (on or before expiration) to preserve your prior acts.
* If you switch carriers, the rules are the same: bind with the new carrier on
or before expiration. (If switching carriers, make sure to get prior acts
coverage from the new carrier- most provide it free.)
* If you stop inspecting and no longer need or want insurance, consider
purchasing Extended Reporting or Tail Coverage to cover the inspections
completed while insured.
Renewing – Financing
It follows then, that if you’re renewing your policy with the same company, make
sure to renew on or before expiration. It’s that simple. OREP provides multiple
reminders as your expiration draws near to make certain you know your policy is
expiring and what is at stake, including by mail, email and phone. If money is
tight, financing is available. It is always wise to follow up to make sure your
new or renewal application has been received by the office.
Switching Carriers
To qualify for prior acts from a new carrier, there must be continuous
coverage. What does this mean? It means you must switch on or before your
current policy expires so there is no break in coverage. Most companies have a
question on the insurance application that asks if you have current coverage for
this reason. If you indicate you have insurance, you will be asked to provide
proof of coverage (your Declarations Page). If you can’t find your Declarations
Page, ask your current agent to resend it. That’s what you pay us for. Always
check the dates on this document to make sure coverage goes back as far as it
should.
Don’t be Bullied
Give yourself sufficient time to shop before expiration for the reasons
explained but if your insurance company pressures you for a renewal decision
well in advance of your expiration date (or they imply you risk losing
your prior acts coverage if you don’t renew with them), they may be trying to
limit your ability to shop. You can guess why.
Remember this: you don’t have to stay with your current company to preserve your
prior acts nor do you have to purchase an Occurrence policy. You can preserve
your prior acts as long as you switch coverage before it expires. Each
company is different, so make sure to ask your agent how long your grace period
is, in case you need it. Don’t give in to the pressure to make a quick decision
but also avoid problems by shopping in advance: always renew or switch on or
before expiration.
Extended Reporting or Tail Coverage
If you choose to stop inspecting and to terminate or not renew your
insurance, you can keep coverage for past inspections with optional Extending
Reporting Period or Tail Coverage. Extended Reporting or Tail
Coverage is offered by most Claims Made carriers for additional premium.
Peace of Mind
There is peace of mind in knowing you’ve done the
numbers, understand the issues and are making an informed decision. Due to
changes in the insurance market, if you haven’t done the numbers lately, you owe
it to yourself and your business to compare coverages and prices. This is
especially true if you pay “per inspector” for your multiple inspector firm or
if you pay extra for “corporate coverage,” pest, radon or commercial
inspections. You have more choices, make your decision an informed one.
Disclaimer:
This article is written from an insurance perspective and is meant to be used
for informational purposes only. It is not the intent of this article to provide
legal advice, or advice for any specific fact, situation or circumstance.
Contact legal counsel for specific advice.
About the Author
David Brauner is Senior Broker at OREP (www.orep.org)
and has been involved in providing E&O insurance for home inspectors for 16
years. He is licensed in 49 states. Calif. insurance #0C89873. He can be reached
at:
dbrauner@orep.org or (888) 347-5273.