Why Real Estate Agents Need Errors and Omissions Insurance in 2011

Given a questionable job market, soaring unemployment rates, and sagging employee confidence, it is no wonder so many would be homebuyers are sitting on the sidelines just waiting for something – anything – to give them the warm fuzzy feeling they need to take the next step. As such, with home buyer confidence at or near an all-time lows many real estate agents and their businesses are running real slow as we end 2010. One impact of this slowdown is that one could become complacent and take their eye off some imparts of their business like – keeping up insurance – errors and omissions (E&O) insurance to be specific.
Real estate agents and brokers who keep errors and omissions (E&O) insurance in their costs column will likely benefit them in the tumultuous housing market in 2011 and beyond. Why? Let’s take a look.
Severe drops in home prices and home sales mean real estate professionals can expect liability problems related to E&O. Buyers who are upset about the decreasing value of their recently purchased real estate can sue any professional who took part in the sale. Real estate agents and brokers beware.
Keep in mind that such suits take three to five years to develop.
Two allegations that often present themselves are:

Real estate professionals’ misrepresenting or not disclosing information, which hurt the plaintiff’s finances, or Plaintiffs claiming they were cajoled into purchasing an unaffordable home.
Frivolous or not, these claims can result in a broker or agent being listed as a defendant. Unfortunately, property sales have tons to do with timing and market cycles. But once the suit starts, there’s no bailing out. Costs range from $10,000 to $30,000, not to mention the time and energy that cannot be earned in a bottom line.

The lesson to be learned: Keep E&O coverage to avoid being an uninsured professional faced with defense and settlement costs. Paying the premiums is a small price compared to racking up thousands of dollars in court.

A quick Google search yielded a few places you might use to research E&O if you are currently without – this one offers a free insurance quote, this one is E&O specific, and it might also be good to check with your local board for a list of referenced agents.
Furthermore, it’s a fallacy that premiums paid in the past guarantee future coverage for claims and suits from past transactions. Claims-made coverage works differently occurrence-based insurance. With claims-made coverage, the insured broker or agent is covered when the insurance policy is in effect. The real estate professional must contact the insurer when a claim is filed during the policy period, or within the 30- to 90-day period after the policy period ends.
There is E&O prior-acts coverage where insurance coverage applies to claims rooted in sales from years past. The real estate agent simply needs to have kept continuous coverage, including prior-acts coverage, for that entire policy period. Real estate professionals need to be cautious when switching coverage, too. In doing so, they should find out what coverage is dropped, especially if prior-acts coverage is no longer included.