What Types of Insurance Do Appraisers Need?
Real estate appraisers may need a variety of different types of insurance, depending on their business operations and staff. While most appraisers are familiar with E&O insurance, E&O does not cover every exposure that an appraiser may face. There are several other types of coverage that appraisers should be aware of. Here is a complete guide to the types of insurance that real estate appraisers carry, what each type covers, and who needs it.
Appraiser E&O Insurance
The most common type of insurance that real estate appraisers carry is E&O Insurance, which stands for errors and omissions insurance. This is also sometimes called professional liability insurance. Appraiser E&O insurance covers them for mistakes that they make in their reports such as recording a property’s square footage wrong, reporting zoning incorrectly, or inaccurately reporting market conditions. The majority of real estate appraisers carry E&O insurance because it is a common requirement of lenders and appraisal management companies that frequently hire appraisers for residential mortgage appraisal work and even for commercial assignments. The most common insurance requirement for appraisers is $1,000,000 in E&O coverage.
Appraiser General Liability Insurance
General liability covers bodily injury and property damage, as opposed to the appraiser’s professional mistakes or errors in judgement. Most real estate appraisers do not have physical offices that clients and prospective clients come visit, so the typical “slip and fall” type liability claims that general liability covers for small business generally do not apply. Examples of property damage an appraiser might cause while out on the job include stepping in wet cement, knocking over an expensive vase, flushing a toilet and causing it to overflow, or opening an attic hatch and having insulation fall on a homeowner’s expensive clothing. Examples of bodily injury might be opening a door and hitting an unsuspecting homeowner in the face, or having a ladder fall and knock a prospective buyer in the head. As the leading provider of Appraiser E&O insurance nationwide, OREP serves roughly 10,000 appraisers with their E&O insurance and less than three to four percent of those appraisers carry a separate General Liability policy.
Cyber Insurance for Appraisers
While traditionally, appraisers have shied away from purchasing a stand-alone Cyber policy, more and more appraisers today are carrying Cyber insurance due to the increased exposure of data breaches, ransomware, and hacking. $1,000,000 limit policies typically start in the $700-$800 range. OREP has a low-limit starter policy for appraisers that starts at $125 for $100,000 of Cyber Coverage. The policy primarily provides third-party liability coverage, but also provides some data recovery coverage as well as a $10,000 ransomware limit. Appraisers that are looking for full Cyber coverage are encouraged to purchase a minimum of $500,000 of Cyber coverage, but as a starter policy, OREP recommends the $100,000 for appraisers looking for coverage on a budget.
Worker’s Compensation Insurance
Most appraisers are solo-operators running one-person offices, so they do not carry Worker’s Compensation insurance. Those appraisal firms that either employ general admin staff or other appraisers are typically required to carry Worker’s Comp insurance under state law. Some select states, like Texas, do not require Worker’s Compensation insurance, but the vast majority of other states require businesses to carry Worker’s Comp insurance if they have employees.
Employment Practices Liability
Similar to Worker’s Comp, this coverage is for appraiser business owners who have employees. While this coverage is not required by any state law, it protects business owners in the event that an employee sues them alleging sexual harassment, wrongful termination, hostile work environment, or a violation of labor laws or their employee rights. This is a useful coverage to have for small business owners who are building their business because as one hires more and more staff, exposure from employee lawsuits increases.
About the Author:
Isaac Peck has over 15 years experience specializing in professional liability insurance and is the President of OREP Insurance and the Publisher of Working RE Magazine. OREP is a leading provider of appraiser E&O insurance nationwide and serves over 10,000 appraisers annually—roughly 15-20% of all active appraisers in the U.S. OREP leads by providing comprehensive coverage that includes up to $500,000 of Discrimination Claim Coverage and includes $100,000 of bodily injury and property damage in its primary policy at no extra charge for its insureds. OREP also offers a comprehensive benefits package for its OREP Members which includes 14 hours of Free Appraiser CE, guaranteed delivery of Working RE magazine, free attorney support when facing a board complaint, and much more. Visit OREP’s Appraiser E&O Insurance Page to learn more.