Real Estate Agent Insurance: The Ultimate Guide

Working as a sole real estate agent or running your own real estate agency includes a varied array of tasks and responsibilities. Failing to meet the expectations of sellers, buyers or tenants you interact with (or being seen to fail to meet expectations) can result in various forms of potential litigation. Such litigation may cost you in paying out claims, in legal fees that accrue during the course of a claim being pursued, investigated and resolved, and your business’ reputation.

In addition, all the standard risks apply when running your business, in regards to protecting yourself from unforeseen circumstances like cyber crime, fire and water damage to your agency premises and equipment, and so on.

Because of all this, it is vital that those operating as real estate agents in Australia are adequately insured with not only Business Insurance, but also for those exposures unique to the real estate industry.

In this article, we’ll talk about Real Estate Agent Insurance, why you need it, what it includes, and how to ensure you opt for the right policies so that you can feel comfortable knowing you are sufficiently covered.

What is Real Estate Agent Insurance?

Real Estate Agent Insurance falls under the umbrella of Business Insurance, however it is tailored to include cover for exposures unique to those working in the real estate industry. Real Estate Insurance should include policies that cover you in a range of circumstances relevant to operating as a real estate agent.

What are the risks for Real Estate Agents?

A Real Estate Agent’s job is extremely varied. It includes dealing with a range of clients, including those looking to buy real estate, those looking to sell, and those renting premises. As part of this, agents are required to be knowledgeable about a range of property markets, and at times, provide advice to clients. They must also be up-to-date with best practices in their industry, abide by all regulations, plus deal with legal entities and ensure the correct completion of documentation.

This is by no means an exhaustive list of the tasks a real estate agent completes, but it is clear from looking at these responsibilities that there are many risks involved in working in this role. As an agent, you may do your best to provide correct advice to a client, but they may claim it was incorrect or dishonest. You may complete a document incorrectly, or fail to ensure that a client has completed it correctly. Examples of other exposures you face as a real estate agent are:

• Your employee is injured during a property inspection. As part of their worker’s compensation, you need to pay them wages while they recover.
• A tenant damages a property you are managing. The landlord asks you to confirm that due diligence was completed before the tenant was approved. It’s found that the proper background checks weren’t conducted. The landlord takes action against you.
• You experience a cyber attack and confidential data relating to your clients’ finances, addresses, and images of their identity documents is stolen. Your business reputation is at risk.

What types of insurance are included in Real Estate Agent Insurance cover?

Firstly, there are some types of insurance that are compulsory. To legally operate as a Real Estate Agent in most states in Australia, you must have Professional Indemnity Insurance. Additionally, if you employ staff as part of a Real Estate Agency, you also must have Workers Compensation Insurance.

Let’s look at some of the types of cover real estate agents need. Note, in your particular situation, you may require cover beyond that listed below.

Property Insurance

Property Insurance protects a real estate agent against financial losses caused by unexpected events, like fires, storms, theft, and lawsuits. This covers the physical structures or business property such as your office, stock, buildings, contents, and equipment.

Property Insurance coverage can help you repair or replace damaged property, cover the costs of a temporary relocation, and make up for lost income if your real estate agency is forced to close due to a covered event. Whether you own or lease your agency premises, property insurance would be considered by many to be essential.

Business Interruption Insurance

Business Interruption Insurance covers the loss of business due to an unexpected event, such as a fire at your agency. This can include loss of profits as well as additional costs incurred in order to get your business back up and running.

For example, if there is damage to equipment, Business Interruption Insurance can help to cover the cost of repairs or replacement. It is important to have business interruption insurance in place in order to protect the business in case of an unexpected event.

General Property Insurance

This cover protects your mobile equipment, such as phones and iPads when they are away from the premises. General property insurance is a useful insurance policy to have, given how much digital devices are relied upon during the day-to-day tasks of a real estate agent.

Burglary Insurance

Burglary can be costly, considering the cost of repairing damage to your premises, and the disruption to your operations when waiting for repairs to take place.

Burglary insurance can help to cover the costs of repairs and lost property. A Business Insurance policy may include financial protection in the event of theft of cash.

Glass Insurance

If you are leasing your real estate agency premises, then glass coverage may be something you wish to include in your Real Estate Insurance package. Glass insurance covers leaseholders for damage to external windows, internal panes and signage if broken during the period that the insurance is purchased for. Glass insurance will cover you for expensive repair and replacement of damaged glass.

Professional Indemnity Insurance

As part of your role as a real estate agent, you will give advice to your clients. The circumstance may arise that your client is dissatisfied with your services and brings a claim against your business. This may occur if:

• A client claims that the advice you gave them was incorrect, and that following it resulted in a financial loss for them.
• A client claims that you have been negligent in your role, and brings a civil liability claim against your business for breach of contract.
• A client alleges that you misrepresented information to them, or omitted important information before a sale
• A client alleges you mismanaged their property
• A client alleges that you breached statutory provisions under a particular law.

Professional Indemnity Insurance, including Professional Negligence cover, is there to cover you in circumstances like those listed above. This form of insurance is mandatory for real estate agents in most states in Australia. It can also cover claims against any agents, contractors or subcontractors that you employ and are deemed legally liable for.

Professional Indemnity Insurance may also:

• Cover you for costs incurred while a claim is being investigated
• Cover public relations costs incurred as part of reducing reputational damage following a claim
• Cover you after you have left the real estate profession, for a claim made against you for an error, omission or act made in the past, which you are found to be legally responsible for.

Workers’ Compensation Insurance

Workers’ Compensation Insurance is an important investment for anyone running a real estate agency and employing staff. In fact, it is compulsory to have this insurance if you are an employer in Australia.

Workers compensation covers workers in case they become sick or injured because of work, and includes payments to your employees to cover their wages while they’re not fit for work, and for their medical expenses and rehabilitation.

Your staff may work in a number of different locations where unexpected events may occur, including at your site of business, in properties they are showing to potential buyers and tenants, or just on the street.

Having Workers’ Compensation Insurance also serves to promote workplace safety by holding employers accountable for creating safe environments for their employees. Having it gives your employees peace of mind, knowing that you are prepared in the event that they may need to make a worker’s compensation claim.

Public Liability Insurance

Public Liability insurance is highly recommended for real estate agents, whether you interact with the public on your business premises, or you or your staff meet with the public at open inspections. It covers you if you are liable to pay claims arising from personal injury or property damage caused by your actions, or those of your staff, during your business operations.

Damages paid in public liability claims are intended to cover the claimant’s expenses like medical bills due to bodily injury, and for lost income during recovery, plus legal fees. If property damage has occurred, damages may cover the cost of repair or replacement of the property in question.

Public Liability Insurance is one of the most common types of insurance products that businesses in Australia take up, and for real estate agents, it is especially important. Many clients will request evidence that you are covered for public liability, before they will allow you to run open-house inspections of their property.

Management Liability

Management Liability is a form of professional indemnity insurance that protects company officers, directors, managers and business entities in real estate businesses if they are sued or named in an investigation. The risks covered with this type of insurance are:

• Financial mistakes when managing company finances
• Director liability if someone believes them responsible for losses due to mismanagement.
• Data breaches
• Unfair dismissal claims by staff

Management Liability Insurance can protect your company, and you as an individual, from fines or penalties imposed by a regulator due to unintentional breaches of statutes.

Cyber Insurance

As a real estate agent, much of your work will be performed in the digital world. In addition, you will likely be responsible for safely storing client data, such as ID documentation, bank account details, and personal information such as addresses and phone numbers. Whilst cyber insurance won’t stop a cyber crime occurring, it will ensure you are covered in the event that a cyberattack takes place, and company or client data is put at risk.

A cyber policy helps to protect your real estate business against data theft that could be committed through hacking, social engineering, or privacy errors. This coverage can help protect your business against significant financial losses.

How will an Insurance broker assess me for Real Estate Agent Insurance?

An insurance broker that specialises in Real Estate Agent Insurance will make a full assessment of both your business premises, and how you operate your business, as part of determining what insurance cover you will likely need.

Insurers will include a number of considerations in their assessment. Some of the common questions asked relate to common exposures like fire and water incidents, or incidents that could result in liability claims. These include:

• What is the age of the premises your business operates out of, and how was the building constructed?
• Where are your premises located?
• What fire prevention measures are in place? Are extinguishers serviced?
• Do you need to hold cash on the premises?
• What steps have you taken to secure the premises overall (CCTV etc)?
• How do you secure customer documentation?

The importance of a Business Continuity Plan

Not only will an insurance company identify potential exposures in order to put together a range of policies to cover your business, but they will also discuss with you how you plan to avoid incidents in the first place.

An insurance broker will want to see that you have a Business Continuity Plan (BCP) in place, should anything go wrong. This should be prepared regardless of how small or large your operation is. You need to know how your business will respond to unforeseeable circumstances so that you can still deliver your services and maintain your business’ reputation.

Steadfast Eastern Insurance Brokers – Hospitality Insurance

We understand the challenges those operating as real estate agents face. We take a wide-ranging view of your operations to identify potential exposures and ensure that we create a package of suitable insurance policies that guard you against potential business damage.

Contact us to discuss a Real Estate Agent Insurance package for you.

Check out related articles:

• Types of business insurance
• Types of small business insurance