Real Estate Brokerage Business Insurance
Getting business insurance for your real estate brokerage is essential.
Real estate brokerages need to be protected against claims that arise as a result of professional negligence caused by contracted real estate agents and/or brokers.
For example, one of your real estate agents fails to disclose a required defect on a property, or an agent negligently misrepresents a property to potential buyers.
We’ll help you find the most personalized and affordable coverage for your unique business.
Best Insurance for a Real Estate Brokerage
General liability insurance is — generally speaking — one of the most important insurance policies for real estate brokerages.
Some of the risks general liability insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
Due to the nature of a real estate brokerage — and the relatively high risk of professional negligence — you may also need to purchase additional coverage in order to fully safeguard your business.
Additional policies that you may need include:
- Errors and omissions (E&O): This is actually a legal requirement for brokerages in several states, and covers liability that arises as a result of negligent acts and omissions.
- Commercial property: This type of coverage will help you to replace and/or repair your business’s property in event that it is damaged or stolen.
When it comes to finding the right coverage for your real estate brokerage, you will be able to choose between the following types of insurers:
- Online insurers: These rely on AI in order to avoid having to use a licensed insurance agent and offer automated quotes online (e.g., Tivly, etc.).
- Brick-and-mortar insurers: This is the more “traditional” approach, which entails talking to a licensed agent before getting a quote (e.g., The Hartford, CNA, etc.).
Cost of General Liability Insurance
On average, real estate companies in America spend between $400 - $700 per year for $1 million in general liability coverage.
Compare the average cost of general liability insurance for a real estate brokerage to other professional industries using the graph below.
Several factors will determine the price of your policy. These include your:
- Number of employees
- Per-occurrence limit
- General aggregate limit
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.
A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
Find the Best Rate
Discover the best coverage at the lowest rate in our low-cost business insurance review.
Common Situations That General Liability Insurance May Cover for a Real Estate Brokerage
Example 1: During an open house event you host in a home with an extensive collection of antiques, you accidentally knock an expensive figurine off a shelf and it breaks. General liability insurance would cover the replacement cost of the figurine.
Example 2: While you show a potential buyer around a house, he slips on a cord you failed to cover, breaks an arm, and decides to sue. General liability insurance would cover the potential buyer’s medical bills, your legal fees, and any damages awarded by a court.
Example 3: While conducting a walkthrough of a home after a showing, you fail to turn off the bathroom fan. After you leave, the fan motor overheats and ignites a fire that damages half the home. General liability insurance would cover the cost to repair or replace the damaged home.
Other Types of Coverage Real Estate Brokerages Need
While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:
Professional Liability Insurance
Because most real estate transactions involve large sums of money, professional liability insurance is essential. This coverage, also known as “errors and omissions” insurance, protects you when a client sues because they are unhappy with their transaction, claiming your professional advice and representation is at fault.
Commercial Auto Insurance
If you use a personal car for business activities, your personal auto policy may not cover losses from a work-related accident. State law mandates minimum levels of commercial auto coverage to protect both you and others on the road in the event of an accident. While each state requires a certain level of insurance for vehicles on public roads, the minimum requirement only offers basic protection. As such, consider purchasing limits greater than those required by state law.
You can purchase commercial auto insurance as a standalone policy or as part of a business owners’ policy (BOP).
Commercial Property Insurance
As a real estate agent, you know how expensive it can be to repair or replace a damaged building. If you own the building in which you operate, you need commercial property insurance to cover your building and the business property stored there in the event of a fire, burglary, or natural disaster.
You can typically purchase this coverage as part of a business owner’s policy (BOP).
Commercial Umbrella Insurance
For many of your clients, real estate transactions are expensive and emotional. As a result, you face greater liability exposure than other businesses. While your general liability policy covers most claims, some lawsuits may be so expensive that they threaten to exhaust the limits of your primary coverage. Commercial umbrella insurance protects you from paying out-of-pocket for legal fees and awarded damages that exceed your primary policy.
Additional Steps To Protect Your Business
Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.
Here are several things you can do to better protect your real estate brokerage:
- Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
- Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
- Stay up to date with business licensing.
- Maintain your corporate veil.
Real Estate Brokerage Business Insurance FAQ
Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.
A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.
Yes. Depending on your state, you may be legally required to purchase E&O insurance in order to operate legitimately.
Regardless, getting business insurance as soon as possible is recommended for a brokerage due to the nature of the job (e.g., the large number of agents that you will be legally responsible for, etc.).
An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.