Financial institutions and buyers or sellers of property hire real estate appraisers to determine a property’s value. With the boom and bust in the real estate market over the last decade, the role of the real estate appraiser has become even more important and, unfortunately, even more risky.
Physical risks to individuals and property are always present as an appraiser evaluates a property. In addition, because property value, as determined by a real estate appraiser, can be used for mortgage lending, tax assessments, buyer-seller negotiations, business mergers, foreclosures and more, even a small error can have huge consequences for the interested parties – and ultimately for the appraiser.
Whether you are sole proprietor or a larger appraisal company with employees, you need a variety of business insurance policies to protect you, your employees and your business assets from the risks you face.
Real estate appraisers need a variety of business insurance policies to protect them from the costs of accidents, injuries and errors. The specific types of policies and coverage you need depend on whether you are a sole proprietor or a small business with employees and whether you use independent contractors.
You must obtain a comprehensive portfolio of real estate appraiser insurance that best suits your unique business.
You need to consider the following types of business insurance policies:
Errors and omissions (E&O) insurance – or professional liability insurance – protects professionals, their partners, their employees, and the partnership or corporation from damages resulting from failing to provide professional services. As the definition of “professional” broadens and our society becomes more litigious, an increasing number of businesses are becoming exposed to E&O lawsuits or claims.
Businesses that provide professional services can be sued based on erroneous advice given, errors in services provided, negligence or omissions that cause a client to lose money. Real estate appraisers provide a valuable service to individuals or entities looking to engage in real estate transactions. Errors in valuation can lead to financial harm to one of the interested parties. E&O insurance is the way to protect yourself if you are sued.
Your CGL policy does not cover you for lawsuits related to the professional services you provide. Errors and omissions insurance is needed for these types of claims in order to pay defense costs as well as any settlements or judgments rendered against you.
Because of the wide variation in the types of businesses or professions that need E&O coverage, there is neither standard policy language nor a one-size-fits-all solution. Every type of professional or professional services firm has unique exposures, and their E&O policies should reflect that. E&O coverage can be purchased for real estate appraisers who work at a larger firm or for individual appraisers who act as contractors or sole proprietors. You must work closely with your independent insurance agent to make sure your policy fits your needs and addresses the unique exposures of real estate appraisers.
Keep in mind that a professional liability policy does not cover you for criminal, fraudulent or malicious acts; bodily injury or property damage; workers’ compensation claims; punitive damages; automobile liability; property claims; or any other general liability issues. Your policy’s exclusions specifically reflect your professional liability risks.
Business auto coverage might not be a cut-and-dried issue for most real estate appraisers. Are you a sole proprietor who uses your personal vehicle for work? Do you have employees or use independent contractors that use their personal vehicles for business purposes? If your real estate appraisal business does not own any vehicles but you or others use personal vehicles in the course of doing business, you need hired and nonowned auto liability coverage.
If you or one of your employees causes a car accident while working, the business can be held liable for bodily injury or property damage that occurs – even if the driver has personal auto coverage. Why? Some insurance companies exclude business use from personal auto coverage; otherwise a claim may exceed the limits of the driver’s personal auto policy. Either way, the business needs coverage, too.
Hired or nonowned auto liability insurance protects your company if you are sued as a result of an automobile accident that you or your employee has in a personal vehicle while on company business. It covers bodily injury and property damage caused by a nonowned vehicle that is being used to perform activities for your business.
You can add nonowned auto liability coverage to your business auto policy. If you do not have a business auto policy (because your company does not own any vehicles), you can usually add nonowned auto liability coverage to your general liability policy.
Real estate appraisers may need additional business insurance policies, including the following:
Most real estate appraisal businesses perform basically the same services. But no two businesses are exactly alike. To find the best business insurance policies that meet your budget, you need to obtain a variety of quotes from different insurance companies and choose the combination of coverage and price that best address your risks.
When comparing quotes, be sure that you are comparing equivalent coverage. If one quote is significantly less than another, be sure you are using an apples-to-apples approach. In addition, the best way to ensure that your needs are met is to engage with a trusted, independent insurance agent who can act as your adviser so you can get back to running your business.