Professional Indemnity Insurance Essentials For Your Real Estate Business
If you offer expert real estate services and advice, you are required to take out professional indemnity insurance in Australia.
The real estate industry is a risky business. Over the years the day-to-day dangers faced by agents and property managers has increased. From slip and fall incidents to evictions and misleading advice, ensuring you have the right insurance cover is critical to mitigating potential damage.
What is professional indemnity Insurance?
Professional indemnity insurance for real estate professionals is designed to offer coverage against legal action. As an agent selling or managing property, or offering property advice, you are at risk of a lawsuit should you breach your duty of care, whether intentional or not.
The right professional indemnity insurance policy can provide cover for you, as well as your partners, principals and employees if they are sued individually.
If you’re in the real estate business, including both residential and commercial property, you may need professional indemnity insurance.
Here are the essentials to consider before taking out coverage:
Why do real estate businesses need professional indemnity insurance?
Whether you work in residential or commercial property, in a large company or as a lone agent, the right insurance cover is important.
Real estate agents act as an intermediary, between those buying and those selling properties.
As an agent or real estate professional, there are multiple responsibilities involved in the role which may require certain insurance coverage. Some of these are to:
- Offer advice on property market conditions, prices, legal requirements and mortgages.
- Act as an intermediary between buyers and sellers who are in negotiation over property.
- Prepare property-related documents, including contracts, deeds, closing statements, leases and purchase agreements.
- Promote property sales through open homes, advertising and listings.
- Compare similar sold properties to determine market price.
- Use existing experience and knowledge of property type and location to determine market price.
- Advise sellers on how to make their homes more appealing to potential buyers.
- Visit properties to assess them before showing to clients.
- Maintain up-to-date knowledge of the property market by attending seminars and reviewing property listings.
- Represent and look after the best interests of clients involved in property negotiations.
- Manage rental properties on behalf of owners and act as expert leasing agents.
Due to the nature of the work mentioned above, professional indemnity insurance is required under most agent licenses. If you’re perceived as negligent in any of the above duties as a real estate agent or professional, you could face financial loss and legal action.
What are the risks real estate agents face?
If a client claims that you have not provided proper advice, professional indemnity insurance can provide you with adequate cover to minimise financial and legal costs should they pursue litigation. Other risks covered under professional indemnity insurance should they be breached, include:
- Negligence in promoting a property and poor property management.
- Negligence in following legal laws or company guidelines.
- Negligence in offering proper real estate advice.
- Negligence in providing authenticity of work.
- Negligence in preparing reports, sales orders and proposals for clients based on inaccurate data and information.
- Negligence in forecasting market trends, resulting in incorrect decision making.
Benefits of professional indemnity insurance for your real estate business
Under professional indemnity insurance, and depending on policy details, real estate agents and professionals can be covered for the costs associated with a legal defence and damages payable following a claim.
Because of the ever-changing nature of the property market, taking out professional indemnity insurance can minimise the impact of any legal claims.
Professional indemnity insurance is used in most service industries where advice is provided including; by lawyers, accountants, financial advisors and real estate agents. Mistakes and omissions in the workplace happen. But with adequate insurance, your assets can be protected.