Professional Liability Insurance for Real Estate Brokers

State Requirements

Licensing requirements for professional liability insurance for real estate brokers varies from state to state. Although every real estate broker should have sufficient coverage to meet the requirements of the state they do business in, it is a far better idea to exceed that coverage and buy a policy which fully protects the broker.

Real estate brokers who belong to certain professional organizations may also have to have a certain level of professional liability insurance above and beyond what states requires as a condition of membership into the organization. It is important for brokers to have a full understanding of what is required of them from both the state and the professional organizations with which they hold membership. Deviating from these standards may result in the broker losing licensing or membership.

Claims Against Real Estate Brokers

What kinds of claims are filed against real estate brokers? Any time a customer loses money on a real estate transaction due to the broker's error or negligence, a lawsuit can be filed. Although the number of professional liability lawsuits encountered by real estate brokers pales in comparison with those encountered by doctors, the possibility still exists. A policy must be sufficient to cover the potential financial burden which accompanies a lawsuit.

Examples of possible lawsuits against real estate brokers include:

• Buyers losing a deposit when an error from the broker causes the sale to fall through.
• The buyer not being told by the broker that a certain inspection needs to be accomplished, forcing the buyer to either scramble to get it done or pay costly fees.
• The broker not completing the closing documents correctly, causing a delay and a possible cancellation of the sale.

Even the most meticulous real estate broker can make mistakes on mortgage documents, especially since each home sale involves a substantial amount of paperwork. Something as simple as transposing a number can throw off all the documents and become a very costly mistake. Claims can also be filed when there is no justifiable reason for the lawsuit, but until the case is dismissed legal fees will still be incurred.

Available Professional Liability Insurance for Real Estate Brokers

There are many insurance companies offering professional liability products to a host of professions, including real estate brokers. Some of these companies include:

• CMI Insurance: This company acts as a broker to find the most suitable liability insurance policy for real estate brokers. This company also offers policies to doctors, lawyers, and other professionals who may come into contact with expensive lawsuits as a result of their occupation.
• Hartford: This company offers professional liability insurance policies to both individual real estate brokers and to brokers who work independently of a firm.
• Oxley and Goldburn: This company specializes in insurance products for real estate professionals. They offer personal liability insurance coverage to real estate brokers in addition to other professionals within the real estate profession.

It is a good idea for real estate brokers to consult any professional organizations they belong to for recommendations on a suitable insurance company. Many brokers simply utilize the same company that issues their general liability insurance, but since these policies are so different it is worthwhile to compare several insurers to find the best coverage.

Choose Coverage

Similarl to other types of insurance policies, professional liability insurance can be issued in a very basic form for minimum protection. Enhanced policies can also be issued with riders for additional coverage. An insurance representative can review the details of available coverage with you and also assist you in choosing the best policy for your specific needs.