Insurance for Real Estate Agents
Real estate agents and agencies list, advertise, promote, or arrange the sale of real property or land for the seller or locate properties for a buyer. Real estate agents traditionally work on a commission basis, but fee arrangements are becoming more common in the U.S.
A real estate agent enters into a contractual relationship either with a buyer seeking to purchase property or with a property owner seeking to sell or lease a property. There may be other arrangements such as transaction agents and listing agencies which do not have the same relationships, expertise, or legal obligations.
Real estate agents may offer other services including insurance sales, mortgages, or valuations. In most states, real estate agents need to pass an exam and be licensed in their respective state.
Recommended Insurance Programs for Real Estate Brokers and Agents
Minimum recommended coverage:
• General Liability Coverage
• Errors and Omissions (Professional Liability)
• Property Insurance
• Hired and Non-Owned Auto (full commercial auto if vehicles owned)
• Employee Dishonesty (Commercial Crime)
• Workers’ Compensation Insurance
Other coverages to consider for Real Estate Insurance:
Business Personal Property, Business Income with Extra Expense, Money and Securities, Computer Coverage, Valuable Papers and Records, Employee Benefits Liability, Umbrella Coverage, Building, Computer Fraud, Forgery, Employee Practices Liability (EPLI), Data Breach Coverage (Cyber Liability Insurance).
Common Liability Risks Associated with Real Estate Agents
General Liability Insurance
GL liability is often minimal at the office location due to lack of public access and since most of the client contact is electronic or by mail. If clients do visit the premises, they should be kept in customer waiting areas and designated conference areas. All areas should be well maintained with floor covering in good condition.
An important consideration for business liability is the status of employees vs. subcontractors. The relationships and contracts vary by Real Estate Agency. Contracts should be clear as to which services are provided by the agency to the subcontractors and the expectations the agency has of the subcontractor in terms of their own insurance requirements.
Off-premises risks for general liability can be extensive, and arise from sales visits, inspections, open houses, and similar work at customers’ home or building. Since both buyer and seller are often represented by different realtors, any damage that occurs during open house showings may result in disputes with customers, prospective buyers or sellers, or other realty firms as to who is responsible for damage. Liabilities increase in the absence of controls, especially regarding monitoring keys, the use of lockboxes or other devices that permit easy entry, and record keeping regarding access and visits by agents from other realty agencies.
Agent Errors and Omissions Insurance (Professional liability)
Professional liability, or E&O exposure is the major concern for most agents. Risk factors include the services the applicant provides, the firm’s credentials and experience, and the ratio of professional versus clerical employees. Failure to conduct thorough background checks to verify credentials and education poses a significant risk. Liabilities increase if clerical workers are allowed to do tasks that only the professionals should handle, or if error checking procedures are ignored or are inadequate.
Very serious E&O insurance losses may result from failure to document decisions and actions or to secure client approval for deals. For certain services, such as property management, the insured will have fiduciary responsibility— that is, he or she will have a legal obligation to act in the client’s best interests.
Property liability is generally limited to that of a typical office, although there may be some incidental storage or an area for meetings. Risks arise from the considerable storage of customers’ records, which significantly adds to a fire exposure. Fire sources include wiring, wear, and overheating of equipment. Agents who own their building should consider building insurance as well as business personal property coverage.
Commercial Auto Insurance
Auto Liability risks may be limited to hired and non-owned coverage if the employees are not furnished with vehicles. If vehicles are supplied to employees, there should be clear procedures in place regarding personal use by employees and their family members. The age, training, experience, and records of each driver, as well as age, condition, and maintenance of the vehicles, are all important items to consider. Hired and Non-Owned Auto is always recommended for Insurance Agents and agencies.
Commercial Crime Policy
Crime exposure for Real Estate Agencies comes primarily from employee dishonesty, including risks to theft of customers’ property. There should be methods and procedures in place to prevent employees from gaining access to customers’ property. Realtors also have access to customers’ financial information, which can be used by employees. Liability increases in the absence of proper monitoring of the insured’s workers who may have such access. It is important to keep billing and disbursement as separate duties. Regular audits are also advised.
Workers’ Compensation Insurance
Workers’ compensation liability includes both office operations and significant off-site work for sales, property showings, and similar activities. Ergonomic concerns include eyestrain, neck strain, carpal tunnel syndrome, and similar cumulative trauma injuries that can be addressed through ergonomically designed workstations. Travel can be extensive for agents. The frequency and distance traveled are all items to consider. Agents may show properties at unusual hours to prospective customers whom they may not know personally, posing a potentially serious risk from assault.
Business Liability and E&O Quotes for Real Estate Agents
General Liability Shop.com offers affordable liability insurance quotes for Agents and Brokers throughout the country. Our Real Estate Agent programs include all lines of business insurance, as well as our Target programs for business owners policies (BOP) and professional liability insurance. Get all your business coverage under one easy and affordable policy. Contact one of our business insurance Specialists today at (800) 900-8657, or start a Real Estate Agent insurance quote online now.
Our Top Carrier Solutions for Real Estate Agents
Real Estate Agent Liability Classification Codes
Commercial insurance companies use various liability classification systems in order to classify and rate coverage premiums and insurance costs for Real Estate Agents and Brokers. Here are the most common business insurance classification for Real Estate Agents:
Business Liability Category: Service Business
SIC Business Insurance Codes:
• 6531- Real Estate Agents and Managers
• 6512- Commercial Property Managers
• 6514- Residential Property Manager- No Apartments
• 6515- Mobile Home Managers- Residential
NAICS Liability Classifications:
• 531210- Office of Real Estate Agents and Brokers
• 531311- Residential Property Managers
• 531312- Commercial Property Managers
• 531390- Other Activities Related to Real Estate
Business ISO General Liability:
• Code: 47050- Real Estate Agents
• Code: 60010- Apartment Building Management
• Code: 61226- Property Management
Common Workers Compensation Class Codes:
• 8721- Real Estate and Appraisal Companies- Agents
• 8810- Clerical Employees
• 9012- Property Management- Professionals
• 9015- Property Management- Other Employees