Generally, the most cost effective and efficient way to provide property and liability insurance for your small real estate business is with a Business Owners Policy (BOP) specifically tailored to the type of real estate you sell. These policies will typically have provisions similar to the property insurance and liability insurance sections of the BOP. If you don’t find coverage in a package policy, you can buy property and liability insurance separately.

Property Insurance

The policy covers the structures described in the policy. Accurate descriptions of the properties, as well as inventories of furnishings and equipment, are important to having the coverage you expect and avoiding any ambiguity if you have a claim.

Most policies include coverage for fixtures, machinery and equipment owned by the building owner, attached to a described building and permanently installed. Coverage for some similar items not permanently installed can be added by endorsement. Coverage may also extend to outdoor fixtures and include property, like lawnmowers and snow blowers, which are used to service the premises.

There are many types of coverage that can be added to the basic property insurance, including these common ones:

• Ordinance or Law: If a building is damaged by a covered cause of loss, this insurance pays for costs caused by the enforcement of any ordinance or law requiring demolition of the undamaged portion or for the increased cost of construction to rebuild with mandated construction materials.
• Debris Removal: This coverage increases the basic limit of insurance (often $5,000) to cover the cost for debris removal necessitated by loss to a covered property.
• Outdoor Trees, Shrubs, Plants: This covers the cost to replace landscaping plants lost as the result of a covered cause of loss.
• Glass Breakage: This insurance covers the cost to replace plate and other glass, including cost of supporting bars or frames and cost of lettering and ornamentation.
• Signs Coverage: This coverage insures electrical signs against many accidental causes of loss.
• Boiler and Machinery Insurance: This coverage pays for loss or damage resulting from accidents to pressure and refrigeration equipment, including boilers, air conditioning and refrigerating equipment; mechanical objects; electrical objects; and turbine objects.

Depending on the location of the insured property, it may be wise to add coverage for earthquake and/or flood.

Liability Insurance

Click here for general information about the protections typically provided by liability insurance and coverages that you may wish to add.

Of particular importance if you are selling real estate may be Errors and Omissions Insurance, which protects you if there is a lawsuit charging that something you did or failed to do caused the claimant bodily or personal injury. This coverage provides for your legal defense and pays any damages for which you are liable, up to the policy limit.

Another type of coverage you may find useful is Owners and Contractors Protective Liability Coverage (OCP). It protects a property/business owner from possible liability arising from the negligent acts of an independent contractor or subcontractor hired to perform work on behalf of the insured. The actual purchaser of the policy is the independent contractor or subcontractor, but the protection is for the benefit of the property/business owner for whom the work is being done.

Business Vehicle Insurance

Your personal auto policy probably provides coverage for some business use of your vehicle. A personal auto policy is unlikely to provide coverage, however, if the vehicle in question is used primarily in business. It will not provide coverage for any vehicle owned by a business. For those vehicles you must have a business auto policy.

Should you be driving your personal auto for a business purpose and get into an accident for which you are liable, an injured person could sue you personally. Will your personal auto policy have enough coverage to pay all the damages? If not, a lawsuit may be filed against your business. If you use personal vehicles for business, you want to be sure you have high enough limits to protect your business. You should discuss this with your insurance agent.

Workers Compensation Insurance

States have varying rules about when an employer must provide workers compensation insurance. If you have three or more employees, you should check with your state department of workers compensation to see if you are required to provide workers comp insurance.