Real Estate Business Insurance

It is important to study the dynamics between real estate agents and real estate brokers to differentiate their real estate business insurance needs. A real estate agent is essentially a salesperson who works under a broker. They cannot work independently. Real estate brokers are more knowledgeable and are liable for the actions of their agents.

The following are the types of policies a real estate office should consider:

• Errors and Omissions aka Professional Liability
• General Liability
• Workers’ Compensation (non professional staff, clerical and administration)
• Cyber Insurance
• Commercial Auto
• Business Property

Business Owner’s Policy

A Business Owners' Policy (BOP) protects your real estate business, bundling coverage to meet your customized needs. A business owners insurance policy typically includes the following:

General Liability Insurance

This coverage protects your business from third-party claims of property damage or bodily injury. General liability coverage will respond to the claim if a client slips, falls in your office, and injures themselves while blaming your business for negligence.

Commercial Property Insurance

This coverage protects your financial interest in your owned building or tenant improvements and the contents of your office, such as furniture, fixtures, computers, and other office equipment.

Business Income & Extra Expense Insurance

This property coverage protects your business from lost income resulting from covered physical damage to your building that halts your regular business operations. In case of unforeseen events like a hurricane or fire total loss or any other covered loss, Business Income insurance, with extra expense coverage, will reimburse you for setting up a temporary or new permanent location. 

Errors and Omissions (E&O) Policy

Real Estate Errors and Omissions (E&O) Policy is also known as Professional Liability Insurance. In a small business, your clients trust you to provide the correct information about the property and competently handle the entire sale or buying process. Errors and omissions could result in financial loss to your clients. This liability protection insurance policy protects you for the professional services you provide that may cause your client to suffer a financial loss.

Commercial auto

Commercial auto insurance is different from personal auto insurance, so if you regularly use your personally owned auto for business purposes, like taking clients out for lunch or picking up office supplies, let your personal auto agent know how the vehicle is used to ensure there are no gaps in coverage. Your personal auto policy may need changes (endorsements or a rewrite to a business auto policy), so the carrier doesn't deny a claim when an accident occurs.

Cyber Insurance

Real Estate businesses are high-tech and store sensitive client information on their computer operating system. If your company's system is breached, your cyber insurance can cover the costs of notifying the affected clients, managing your reputation with public relations consultants, and defending against liability lawsuits. If, for instance, your IT department misses a security software update, and a hacking incident occurs, your business could be found legally liable. This policy would also respond to first-party claims, for instance, damage to the system, denial of service, or ransomware attacks, which might shut down your entire system. Cyber policies are not created equal, so do your homework and read the policy to ensure you have the coverage you need.

Real estate businesses have unique insurance needs, depending on the type of real estate handled, the size of your business and other factors like:

Location - A commercial property's economic and geographic locale can impact the costs of real estate property insurance in two ways. Generally speaking, the city and state where the property is located can affect the insurance premiums. The fact is that there are several areas where the property policy premium will be higher. For instance, in wildfire, earthquake, or hurricane-prone locations, property insurance will be much higher than if these exposures were not present.

Value of Assets insured - Commercial property premiums may also increase because of the year a building was constructed. Buildings older than 25 years may be significantly more likely to have poorly maintained wiring and plumbing. When updates are done to the structure, it can make a difference in the premium. A new roof, updated fuse box, or new wiring can offset the increase in premium due to age. Other factors also matter like:

• Distance to the fire hydrant
• Distance to the fire station
• Presence of central station burglar and fire alarm
• Type of construction
• Flood and Earthquake zones

The real estate market fluctuates regularly depending on a location's population, migration patterns, customer behavior, popularity, and new legislation enforced by local governments. These significant factors contribute to the recurring revenue fluctuations for real estate companies.

As stated by a McKinsey & Company summary, forces shaping the insurance industry will impact real estate owners and managers. Let's focus on a few of those forces and how real estate managers can better protect themselves.

Some factors will impact real estate business insurance underwriting and costs for this year and beyond.

An increased emphasis on data and analytics - From assessing a business' losses to enhanced artificial intelligence, how you interact with the insurance market and how insurance underwriters evaluate your account will forever evolve. Moreover, If you're not eligible for a special rate or network, you may need help getting coverage. Detailed data analytics, increased reliance on technology to make decisions, and other data-driven decisions mean that your insurance broker will wish to present your account more dynamically.

Increased concern about frame construction and multi-family housing units - The insurance marketplace for commercial real estate (CRE) risks is expected to harden in the future. Insurance providers often need higher premiums, increased retention, and possibly even more onerous restrictions and limitations on their policies. This is affecting not only property insurance but also liability coverage as well.

An increased focus on maintenance - Many commercial real estate companies' claims originate from potentially hazardous situations, for example, slips and falls or faulty construction. In addition, insurance companies expect a rise in fires, injuries, damages, and other claims as more tenants choose to stay at home or work remotely. Given that tenants sometimes cannot pay their rent, insurers believe that CRE managers will cut down on maintenance to reduce costs. Scheduled property inspections, training documentation, and increased maintenance documentation go far when provided to an insurance underwriter. Malls and strip malls are now being phased out, and insurers require even more underwriting information from potential buyers.

Senior living, Section 8, and student housing - According to one brokerage, these are the most challenging properties to insure. Over recent decades, standard insurance companies have abandoned insuring these classes, and these risks are written almost entirely by surplus line insurers. Bodily injuries have produced many commercial habitational losses. Shootings, drownings, assaults, fire, and slip and falls have made excess liability and umbrella policies a necessity, as the primary liability limits are exhausted by paid claims. The insurers must charge higher premiums to have the surplus to pay the claims.