6 Insurance Requirements for Real Estate Agents


Real estate agents and brokers are in a position to be sued for malpractice by home buyers and sellers. The possible reasons for these lawsuits include:

 Failure to advise and identify. Agents have a duty to disclose any issues they find during a walkthrough or property assessment. Buyers have a legal right to know what they’re buying before signing the contract. If a buyer discovers damage, like rotted walls, they can sue their agent for failure to identify the problem.

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  • Breach of contract. Deadlines and agreements matter in real estate. When an agent doesn’t follow through according to the contract, the buyer can sue their agent for things like negligence, fraud, or breach of contract.
  • Negligence. An agent that doesn’t perform duties they agreed to perform can get sued. A common example of negligence is an agent not taking action when they become aware of an issue that needs to be handled.
  • Failure to disclose. Failure to disclose is when an agent discovers a defect in the property and doesn’t disclose the issue to the buyer. This can be difficult to prove in court, but it’s not impossible.

 If you’re a real estate agent, you need insurance. All it takes is one lawsuit to drive you into bankruptcy. Here’s what you need to protect yourself against lawsuits:

  A current, valid real estate license

 The first thing you need is a valid, current real estate license. In California, for example, a real estate license is valid for four years. After four years, you’ll need to renew your license.

 Renewing your real estate license is easy, and you can do it all online. If you’ve never had a valid license, make sure to get one before acting as an agent, or you’ll risk getting sued for fraud.

  Professional liability

 Professional liability insurance will cover you in cases where you get sued for errors and omissions. This is the most important insurance policy to carry as a real estate agent.

  Homeowners insurance

 Do you own some of the homes you sell as an agent? If you’re also a property investor, make sure you carry homeowners insurance on all of your properties, especially when they’re vacant.

 You can’t predict when people might break your windows or destroy the inside. If any of your properties get taken over by squatters, they’re going to leave a mess behind when you finally get them out. Without homeowners insurance, you’ll pay for the cleanup out of pocket.

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  Commercial auto insurance

 This should go without saying – if you drive a car, you need car insurance. Being a real estate agent, you’ll be driving around to showings, your office, and meetings.

 Make sure you take out a commercial policy. Even if you already have the best personal auto insurance policy, you still need commercial insurance.

Liability is most important. However, make sure you get enough comprehensive coverage that will pay out if your car gets totaled.

  1. General liability

General liability insurance is important for agents, whether or not they work in an office. Even if you’re just one person, you need this coverage.

This type of policy will protect you against situations where a client trips over a cord in your home office, or falls during a showing. While homeowners insurance might also cover these situations, the details will be left up to the court. You can’t have too much coverage.

  1. Workers’ compensation insurance

If you employ anyone else, you’ll need workers’ compensation insurance. In some states, it’s not mandatory unless you have a certain number of employees. However, not having this policy can prove expensive if you get sued.

Medical bills are expensive, and they pile up fast. If one of your employees breaks an arm and needs surgery, you’ll be footing the bill out of pocket without workers’ compensation.

Real estate agent insurance is easy to get

The good news is you can get all the insurance policies you need from most major insurance companies. For example, Progressive offers several types of insurance in one package specifically designed for real estate agents.

One lawsuit can financially destroy your real estate business. It’s not worth the risk. Whether you’re just one person or you’re running a real estate team, make sure you’re covered by the right policies.