The constant pressure of inflation is affecting just about everyone – homeowners, renters and real estate agents alike.
As a real estate agent, making some cost-saving cuts by reducing your insurance premiums may be tempting.
But this could end up costing you more money in the long run.
Underinsurance can expose real estate professionals to significant financial and legal risks.
Underinsurance occurs when an insurance policy falls short of covering the full value of potential liabilities or assets.
For real estate agents, this could mean unexpected out-of-pocket expenses due to property damage, legal disputes, or professional errors.
The consequences of underinsurance can be severe, impacting not just an agent’s financial stability but also their reputation.
How to make sure you’re not underinsured
Making sure that you have the correct level of cover is as simple as reviewing your insurance policies.
Here are three basic steps you can follow to check whether you’re underinsured:
- Conduct a risk assessment, identifying all potential risks and liabilities that are specific to your real estate business.
- Update your property and asset values if necessary. You should aim to do this at least on an annual basis.
- Finally, review your insurance policies. Evaluate your cover limits and compare them against the potential costs of the risks you’ve identified.
Now that you’ve taken these steps, you can accurately gauge whether your insurance policies could leave you out of pocket should the worst happen.
Professional indemnity insurance
If you’re reviewing your insurance policies, professional indemnity insurance* is likely the best place to start, as it is one of the most common insurance policies taken out by agents in Australia.
Professional indemnity insurance protects real estate agents from the financial impact of actual or alleged negligence arising from the delivery of an agent’s professional advice.
Wherever you are in Australia you should understand your state’s requirements to ensure you have adequate cover.
For example, if you’re an agent in NSW, then you probably already know that operating real estate agents require policies to provide a minimum level of indemnity coverage:
- of not less than $1 million for any one claim
- of not less than $3 million in the aggregate for all claims made during the period of insurance.
However, whether you operate in NSW or not, this level of cover may not suit your needs or business requirements.
By assessing your number of clients and your annual turnover, you can get a clearer idea of whether the minimum legal requirements provide adequate protection for your business.
Public liability insurance
Real estate agents deal with many different people throughout the day, including clients, contractors, strata managers and more.
Public liability insurance* is there to protect you from third-party claims that your negligent business activities caused them injury or property damage.
This includes defence costs cover.
In some cases, this could potentially extend to property viewings.
Depending on the circumstances, if someone injures themselves while at an inspection then you could be held responsible.
Cyber liability insurance
As a real estate agent, part of your job involves handling sensitive, private information.
This includes, but is not limited to, your clients’ financial details and personal identification.
This can make real estate businesses an attractive and lucrative target for cybercriminals.
A data breach not only exposes clients to potential fraud but can lead to serious financial losses for the agency.
Cyber liability insurance* is designed to protect you from the financial fallout associated with cyberattacks and other digital threats.
By investing in cyber liability insurance, agents can help ensure that they have the right resources available to effectively respond to a cyberattack, such as the 24/7 incident response services provided with many cyber liability policies
Make sure your insurance policies have you covered
For real estate agents looking for new cover, or for those who want to compare the rates at renewal, BizCover is here to help.
Visit bizcover.com.au to compare cover options from selected leading Australian insurers and find out how much you can save.
This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.
