Do you think you need insurance coverage for errors and omissions for your home inspections business?
You may think you don’t, but insurance isn’t only for people who might make mistakes. It’s for people who own property, a business or have assets they don’t want to lose.
Anyone can make a mistake, no matter how good they are at their job. In fact, it’s inevitable. A mistake during a home inspection may not be serious, and may never be discovered. But a mistake that does come to light — and costs the new homeowner money — is probably one you’ll hear about.
An ASHI Reporter article tells of a home inspector who turned the furnace off during an inspection in February and forgot to turn it back on again. The pipes froze and burst, costing tens of thousands of dollars in damage. But he had O&E insurance, so he only had to pay $2,500.
What Kind of Insurance Do You Need?
Be sure to understand the difference between general liability (GL) coverage and error and omission (E&O) coverage. GL insurance isn’t enough to protect you in a lawsuit where you might be found guilty of negligence. While GL insurance is broader and covers more aspects of your business, it doesn’t pay out on the level that E&O does. You don’t want to be held liable for these types of judgments.
In some states, home inspectors are required to carry certain types of insurance. Check with your state to see what, if any, insurance coverage is necessary.
When you are in a service profession, clients expect a lot from you. In a real estate transaction, emotions run high. A lot of stressors come with the territory: relocating, committing to a new house in a new neighborhood, paying the mortgage. Potential homeowners worry that they or their family won’t like the new house, that there will be problems with it, or that they might not be able to afford it.
They may look to you as a type of lifeline, someone who will protect them. And in a way, you do protect them. You protect them from being tricked into buying a house that isn’t worth the money. But you don’t protect them from every possible inconvenience. And when they expect that you will, you might run into problems.
Insurance Isn’t Enough
But even when you have insurance, always make sure your clients sign a contract ahead of time. You can find sample contracts online if you belong to a home inspector association or organization, but it’s still a good idea to have a lawyer look it over before you start using it. A good contract can protect you from frivolous claims.
While some people think they don’t need E&O insurance, it’s usually better to be safe. One home inspector writing into a newspaper for advice said he avoided buying insurance because he believed it invited lawsuits. Although it is not impossible for people to file suits just on the off chance they might get a big payout from an insurance company, this type of scam is unlikely to be perpetrated on many home inspectors, because it would be difficult and time-consuming to buy homes and have them inspected repeatedly hoping for an error or omission.
For more advice and information home inspectors can use, check out our website today.