E&O Deductible Waiver: What Real Estate Brokers Need to Know

E&O Insurance: Deductibles & Waivers

Real estate errors and Omissions (E&O) insurance is essential for you and your real estate firm. It's important to understand the details of your policy, and one part of that that is often overlooked is your deductible and/or deductible waiver. 

An insurance deductible is the amount you'll need to pay out of pocket before the insurance kicks in. You might also see this called your retention in your real estate E&O policy.

Some of the best errors & omissions insurance policies for real estate agents will include conditions for a deductible waiver. Let's explain what you need to know.

What is a Deductible Waiver?

A deductible waiver condition in your E and O policy means that if you have evidence of having met certain risk management practices on the transaction that later results in a claim, the insurance company will waive your deductible up to a certain dollar amount (or a specific percentage).

The requirements vary depending on the policy and insurance carrier, but requirements for a waiver typically involve documentation of real estate best practices, such as disclosures, home warranties, or home inspections.

It's important to note that some policies may have narrow restrictions that only a small percentage of your transactions might satisfy. A few policies have more flexible conditions that are not difficult to meet. This would likely mean that you will not pay a deductible on the vast majority of your claims. 

Unfortunately, even with the best of real estate E&O policies, there are usually certain situations where it is impossible to meet the deductible waiver requirements.

Common Conditions for a Deductible Waiver

To benefit from a deductible waiver, generally you must meet a few requirements as outlined in your policy and provide evidence of it when submitting a claim.

These requirements might include obtaining a signed seller disclosure form, securing a written home inspection report from a licensed or certified home inspector, using standard sales contract approved by a state or or drafted by a licensed attorney.

Generally, the easier the conditions are to meet, the greater the chance of not paying a  deductible.

A few policies will even waive the deductible if the agent on the real estate transaction was a principal broker or owner.

Because you might still end up paying your deductible, you should consider an errors and omissions policy that has an aggregate deductible. An aggregate retention limits the total amount you will pay in a given year in deductibles if you have multiple claims. 

Your Agency

If you are a principal broker/owner and have an E&O policy in place for your firm with a deductible waiver, be sure to communicate those requirements or expectations to your agents.

If you're an agent and are unsure about your real estate agency's procedures for risk management, deductible waivers, or deductibles in general, definitely talk to your managing broker about this.

Review Your Coverage

As you can see, it's essential to review your E&O policy and deductible waiver with a knowledgeable real estate E & O insurance agent to ensure you have the right (and best) coverage in place.

We can help you review your deductible, deductible waiver, and aggregate deductible to save you money when it comes time to file a claim.

To get started, simply complete the contact form below, or schedule time for a conversation.

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