Clara Miles, Pearl Insurance
In today’s market, many real estate professionals have considered canceling their Errors & Omissions (E&O) Insurance to help lower their operating costs. But did you know that this lapse in coverage can cost you more than you save?
Most E&O policies are written on a claims-made basis, meaning you are protected against claims made against you and reported to your insurance carrier during the policy period. These policies typically include a “prior acts” or “retroactive” date, indicating the first date you are covered for your real estate services rendered, which usually reflects how long you have maintained continuous coverage. If you cancel your policy or allow it to lapse, you not only open yourself up to claims made after that date, but also lose your prior acts coverage—your protection for all real estate services rendered the years you did have E&O in place.
To maintain this valuable coverage feature, it’s important to note these key guidelines:
Renew on time – Mark your calendar, then watch for renewal communications from your carrier. Make sure you complete and submit any necessary forms right away to help ensure timely processing.
Match your coverage – If you decide to change E&O carriers, verify that your new policy has the same prior acts date. Some quotes may omit this feature to present a lower premium, and it crucial to confirm you are getting the same coverage.
Cover your tail – Should you still choose to end your coverage, look into your Extended Reporting Period (ERP) options, which will provide an extension for reporting claims made against you for real estate services provided between your retroactive date and the expired policy period or cancellation date.
Even if money is tight, canceling your E&O insurance is not the answer. Just one claim against you could cost thousands of dollars more than keeping your policy in force, making it vital to maintain this essential coverage.
Pearl Insurance has been an endorsed E&O provider of the Massachusetts Association of REALTORS® since 2006. For more information about Pearl’s sponsored E&O programs, call Debbie Bindeman, your association’s Regional Director, at 1.800.455.1154.