Liability insurance for certified home inspectors is a given. Errors and Omissions, also called E&O, has a little more wiggle room. Some states don’t require it, but don’t be fooled. Every inspector needs it. With the wrong protection or no policy at all, your business and in some cases your personal assets may be at risk. Shop around for the best combination of rates plus coverage and keep these three points in mind.
Think About Getting E&O Even if Your State Doesn’t Require It
There’s a lot of flexibility within the home inspection industry. One state requires a set number of pre-licensing education hours plus an exam and continuing education on top. Another state has no regulations to speak of. In states that don’t regulate home inspectors, it might be tempting to skip E&O insurance. It’s not exactly cheap, and what’s the worst that could happen?
All that it takes is one negligent act to ruin all of your hard work. If you miss a defect that puts the customer at a health, safety or financial risk, you could find yourself in court. Without insurance, you’ll be responsible for damages awarded by the court. With insurance, your policy will cover it in many cases.
Choose the Right Type of E&O Policy
E&O coverage can be broken down into two main categories: Occurrence and Claims Made. Occurrence policies offer the most protection. They’re also more expensive. Regardless of when an incident happens or when it’s reported, an Occurrence policy will pay the claim, as long as you had coverage when the incident happened.
Claims Made policies are stricter but also more affordable. David Brauner, Working RE magazine editor and senior broker at David Brauner Insurance Services says it causes a lot of confusion. Claims Made will only pay a claim if the policy was in effect at the time of the incident and you kept the policy in force until the claim was reported. Claims Made saves you money on premiums; Occurrence could save you money in the long run if an old claim pops up after the policy is no longer active.
Notify your provider of complaints as well as claims to keep your business in the clear.
When an Incident Happens, Report It Right Away
One of the most frustrating and avoidable ways a certified home inspector can put their business at risk is by not reporting a claim or complaint. Sometimes, it’s deliberate but it can easily be an oversight. For example, if a customer mentions obliquely that they might sue, you should report it. If they don’t, you’re in the clear. But if they follow through with a claim, you’re covered.
Conversely, withholding information from your insurance provider is a dangerous game. While it’s true that in some cases a paid claim might result in higher rates, withholding information could end disastrously. If the customer follows through a year or longer down the road, your provider will want to know why the complaint wasn’t reported. Brauner says they’ll likely pay the claim and promptly cancel your policy. If you switch providers without disclosing prior complaints or claims, you could become a high risk insured with higher rates.
Finally, don’t forget to make your payments. That might seem like overstating the obvious, but policy cancellations happen every day for non-payment. With a Claims Made policy, which is generally more affordable, lapsed coverage leaves you with no protection.
Depending on the validity and severity of the claim, one month’s insurance premium could be the difference between going to work again the next day or defending yourself in court without the help of your insurance provider and shouldering the financial burden of a court award on your own.
Certified home inspectors have more ways now to protect themselves. Insurance is more sophisticated and so are the tools that you use on the job. A home inspection reporting app helps you provide clear evidence of all the different systems in every home you inspect without slowing down your progress. If your software is outdated or isn’t simple to use, maybe it’s time to try something better: Report Form Pro.
Download our home inspection app for Android or get it for your Apple device at the App Store.