Do You Need E&O Insurance as a Home Inspector? by Kassandra Jessup-Prater, RWS Insurance Services
Experienced home inspectors know what to look for in any given job, and most veteran inspectors have detailed procedures and practices for reporting their findings in complete and comprehensive ways to clients. However, even the most experienced home inspectors sometimes make mistakes…and even if you don’t make a mistake, a particularly litigious client can still wreck your business’ progress and tie you up in court for years if you’re not careful. To protect yourself and your business, you should know whether you need E&O insurance as a home inspector, what types of E&O insurance is available to you, and when you might need it. But first, if you’re unfamiliar with E&O insurance, let’s go over the basics. What Is E&O Insurance? E&O insurance is shorthand for Errors and Omissions insurance. It’s sometimes known as “professional liability insurance.” An E&O insurance policy helps protect service professionals and service-providing businesses against the financial consequences of lawsuits related to their work. E&O insurance covers specific types of liability claims, like: • Negligence or substandard service delivery • Failure to deliver services or meet deadlines (contract breaches) • Errors or oversights (omissions) in the work • Misrepresentations or inaccurate advice E&O insurance is different from general liability, which tends to cover physical injuries and property damage. General liability claims, for home inspectors, typically involve “oopsie” mistakes like leaving water running after you leave the inspection, accidentally putting your foot through the floor, and similar stuff. Kassandra Jessup-Prater is a Licensed Adjuster for RWS Insurance Services. She holds her Adjuster License in 48 states. Kassandra also holds a Degree in Paralegal Studies and Graduated with Presidential Honors in 2010. With over 13 years of experience in the Legal and Insurance Fields Kassandra works hard every day to provide excellent service to all RWS Insurance customers.
38 Working RE Inspector Winter/Spring 2023
How Does E&O Insurance Work? E&O policies typically cover expenses related to defending against such claims, including legal fees and court costs. However, the scope of E&O coverage may vary from insurer to insurer, so it’s important to obtain and read the full policy, particularly where it discusses the specifics of its coverage and what costs it’ll handle. It’s important to understand that E&O insurance generally won’t cover criminal and/or illegal acts, bodily injury, and other non-negligent failures of service. It may not cover subcontractors or temporary employees, either, so be careful when adding non-salaried staff to handle your inspection jobs. Of course, it’s highly unlikely a home inspector will injure a client while inspecting a home, and if you don’t steal anything or stab anyone while you’re on the job, you should probably be clear of criminal liability as well. But these gaps don’t mean you shouldn’t have E&O insurance. If anything, you may want to require any subcontractors or temporarily-employed inspectors to carry their own E&O policies, just to be on the safe side. How Much Does E&O Insurance Cost? The costs of E&O insurance will vary between insurers, but it’s generally settled into a predictable range. According to The Hartford Insurance, E&O policies typically cost between $500 to $1,000, per employee, per year. Insureon says the median cost of an E&O policy is $59 per month, or $708 per year, but it offers some industry-specific numbers as well—real estate professionals as a broad category (including agents and appraisers) pay a median premium of $665 per year. Based on these reference points, you can probably budget about $83 per employee per month for your E&O policy. At this level, you’ll be able to cover premiums up to the maximum expected annual limit of $1,0 0 0 per year. If your policy is cheaper, you can always adjust your budget later, or allocate your savings towards other business initiatives.