The very nature of the real estate business leave brokers and agents subject to any number of potential lawsuits and claims, merely as a result of their daily business activities. A simple mistake or bad advice given to a client can result in a costly lawsuit. In order to determine the best insurance products for real estate agents and brokers, we should first examine the differences between the two titles.


Real Estate Brokers vs Real Estate Agents

While the terms broker and agent are often used interchangeably, there are slight differences between the two titles.

  • Real estate agents are licensed salespeople. Exact requirements for a real estate license vary from state to state, but regardless of the state of operation, a real estate agent must work under a broker and cannot work independently.
  • Real estate brokers are a step above real estate agents. Brokers must complete additional education requirements and can work independently or hire real estate agents to work under them. Brokers are liable for the actions of the real estate agents that they employ.

Real estate agents and brokers may also call themselves realtors, which simply means that they pay annual dues and follow a specific code of ethics in order to belong to the National Association of REALTORS (NAR).


The Insurance Needs of Real Estate Agents

The guidance and advice that real estate agents offer their clients every day subjects them to any number of potential lawsuits. Professional liability insurance, also called errors and omissions (E&O) insurance, helps protects agents from financial loss resulting from a lawsuit brought against them by a client.


The Insurance Needs of Real Estate Brokers

Because brokers are legally liable for the actions of their agents, they may want to consider additional coverage as well. Types of coverage for real estate brokers include:

  • Errors & omissions coverage. Even if the agents that work underneath brokers have their own E&O coverage, it is important for the broker to carry this policy as well, as they are legally liable for the actions of the agents.
  • Property insurance. If the broker owns the building they operate from, property insurance is necessary to protect the building and its contents from losses such as fire, theft and natural disasters.
  • General liability insurance. If clients, subcontractors or other guests frequent the office to visit the broker or any agents employed by the broker, general liability insurance is a crucial type of coverage. It protects against claims arising from injuries and property damage, and can pay legal fees and settlement costs if necessary.

Real estate firms face a variety of exposures while operating their business. It is important for them to partner with insurance specialists who understand these exposures and have the wholesale real estate liability insurance products to help manage their risks.