The average claim
costs about $25,000 to defend these days - guilty or not. So, when trouble
happens you want to make sure you're covered. But having insurance is not
When Your Insurance Doesn't
By David Brauner, Senior Insurance Broker at OREP.org
Here’s a riddle- how can an agent/broker have errors and omissions insurance
coverage in place at the time of a sale, yet have no coverage a few
months or years later when a problem surfaces in connection with that
transaction? The answer is simple but the problem is not.
The average claim costs about $25,000 to defend these days- guilty or not.
So, when trouble happens you want to make sure you’re covered. But having
insurance is not always enough.
Many real estate professionals may not
understand that their policies are Claims Made, meaning that claims
must be reported during the policy period. The “policy period” ends when a
policy is cancelled or allowed to expire (not renewed). At this point,
coverage ends for your past work, also known as “prior acts” coverage.
Renewing with the same carrier or switching to a new company at renewal time
does not result in the loss of prior acts coverage as long as the renewal or
switch to the new carrier is completed before the date the policy expires.
And, of course, as long as the new company provides coverage for prior acts
(most do provide it but always ask).
Most agents and brokers realize that claims can take a year or two to
surface at least, which is why keeping prior acts coverage is so vital. For
this reason, many agents choose to carry their own E&O insurance. This
enables them to control their own coverage to make certain it remains
current and in force- so they’ll have it when they need it. Individual
premiums are priced low enough these days to make this a strategy worth
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* If you’re responsible for your company’s E&O policy, begin the renewal
process early enough to avoid an unintentional lapse in coverage- whether
you are staying with the same insurance company or shopping for a new one.
This is especially true if there is a claim or incident as underwriting may
* Avoid letting the policy lapse at all costs. If you’re
retiring, ask your agent about “tail” coverage, which keeps coverage in
force for a year or longer into the future.
* Consider General Liability or “business” insurance to cover claims
at your own place of business- like a “trip and fall” incident, or one that
may arise while you or your staff are at a property, such as knocking over a
homeowner’s antique vase during a walkthrough (oops!). Most BOPs (Business
Owner’s Policy) provide very wide coverage for your business, including
those mentioned and others, such as theft, loss of business and more.
* Consider purchasing a low-cost individual E&O insurance policy of your own,
which is portable and covers you for any transaction you might do.
more, call OREP.org at (888) 347-5273. Or visit us online at
David Brauner is Editor of Working
RE magazine and Senior Broker at OREP.org, a leading provider of E&O
Insurance for appraisers, inspectors and other real estate professionals in
49 states. He has covered the appraisal profession for over 20 years. He can
be contacted at email@example.com or (888) 347-5273. Calif. Insurance Lic.
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