E&O Insurance.....What's the best type of coverage?

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Real Estate Broker Owner with Jody Keating Connective Realty,LLC, Bryan/College Station,TX

 

Connective Realty, LLC E&O Insurance

We are a relatively new real estate brokerage company based in Texas and so one of the many things on my to-do list is getting E&O insurance coverage for both the company and the agents. I am trying to keep costs down (as I'm sure everyone is) as much as possible for the agents. Ideally I would like to be able to cover the costs of this insurance as a company but that can get expensive. As it stands right now, my agents don't have any fees like desk fees, sign fees or franchise fees and I'd like to be able to minimize as much out of pocket expense for them as possible.

So, if you are a broker and you cover this expense for your agents I would love to hear from you. Things like what insurance companies you would recommend and what your average costs are would be really helpful.

Or if you are a broker and you don't cover this expense then do you charge your agents monthly or per transaction rates?

If you are an agent, I would really appreciate hearing your thoughts on paying for this insurance and whether being charged through your broker, monthly or transaction rates work better verses getting your own policy and providing proof of coverage to your broker instead.

Although real estate brokerage companies evolve all the time and things that work now may not work later, I would still like to be able to estabish some quidelines and requirement for the agents and also find the best possible way to get coverage without having to pay a lot of money up front.

Thanks!

 

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bryan college station home sale
eo insurance
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Rainmaker
248,534
Jody Keating
Broker/MM/Realtor, Bryan / College Station, TX
Jody Keating Connective Realty,LLC, Bryan/College Station,TX

Joseph Keech (Blue Atlantic Properties) Joseph, that's not bad. That I could handle. Do you mind letting me know who you use? Some of the rates I've been quoted are pretty riduclous.

:)

February 09, 2010 09:42 AM
Rainmaker
248,534
Jody Keating
Broker/MM/Realtor, Bryan / College Station, TX
Jody Keating Connective Realty,LLC, Bryan/College Station,TX

David Salvato (David home Inspection Service) David, again that's something thats manageable. Thanks for your feedback!

:)

February 09, 2010 09:44 AM
Anonymous #5
Anonymous
John Paul Abosida

I actually specialize in E&O insurance for Real Estate professionals so I thought I would post.  E&O insurance rates vary, and there are a number of factors that go into determining rates.  If it is a smaller size firm with 1-5 agents and you are doing 100% residential Real Estate you can expect to pay anywhere from $700-$1000 per year.   This rate covers you, your firm, its agents i.e. (Independent Contractors) for all of the transactions you consummate. 

Some companies base their rates off of how many agents you have, some base it off of Gross commission income.  Some base it off of both.  All companies give credits for experience in the field of course and you can get other credits for the percentage of transactions where a home inspection is performed, home warranties are placed etc.

E&O Insurance is a claims made policy which means both the claim and occurrence have to happen within the policy period.  When you purchase E&O insurance you will get what is known as prior acts some call it a retroactive date.  This date is very important because the carrier will only cover those claims that OCCURRED after this date.  So if you have a claim but the occurrence took place prior to your prior acts date no coverage is afforded.

I work with many size offices and depending on how you want to do it is optional.  You can charge your agents a per deal rate, flat fee, or a monthly fee.  It is optional and up to you however be aware that cost should only be inclusive of your actual rate you are paying.  Some people build the deductible inside of the fees they charge their agents however if you are going to do this you may want to be sure to outline in your agreement who is responsible for the deductible.  Of course you are ultimately responsible but if an agent does not have to pay the deductible because it is built into their fees it would certainly be a plus to the agent knowing that if there is a claim they don't have to come up with out of pocket expense.  I hope this helps and if you need anything further please feel free to contact me at anytime.

 

John P Abosida

E&O Insurance AGency

jp@realestateeno.com

509-276-9428

March 22, 2010 01:44 PM
Rainer
4,531
Scott Gast
Choice Realty Group

As a compay owner/broker we pay based on the Gross sales volume but I charge the agent per charge of $40 for every $250,000 of units sold.      It comes very close to covering our self some years and others we make a very small profit but after taking the time to add it and keep track I'm sure its more of a break even if were lucky.    My parents own and sale insurance and they have told me many of the local agents have asked for a quote as thier broker is no long offering it to them.  Who knows for sure if its a cost cutting factor but wait till they have a claim and the agent never had coverage.  I'm sure the company will get stuck with the legal fees.

September 20, 2010 11:38 PM
Rainer
19,704
Jerry Hill
Hill Realty

I just started my own small company, just to get out of paying some of the large company fees.  My wife is also an agent and we don't plan on taking on any other agents.  Any advice on where to go to get a quote on reliable coverage?

October 29, 2010 09:54 AM
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Rainmaker
248,534

Jody Keating

Broker/MM/Realtor, Bryan / College Station, TX
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