What Are the E&O and General Liability Insurance Requirements for Home Inspectors?Many professionals in service occupations are required to carry various types of insurance. Professional home inspectors have similar requirements that also include a type of professional liability insurance known as errors and omissions insurance, often referred to as “E&O insurance.”
We’ll look at some of the insurance requirement specifics for home inspectors in more detail shortly, but first let’s examine why E&O insurance is so important for home inspectors, whether they work for themselves as entrepreneurs or are employed by a company that provides home inspections.
What is errors and omissions insurance?
As the name implies, E&O insurance comes into play when an error or omission (oversight) is committed by the home inspector and which results in some type of damage to the inspector’s client.
Home inspectors are charged with making many determinations during a typical service call. They may be checking the condition of plumbing systems, foundations, electrical circuitry, heating and cooling systems and whatever else may be required by the homeowner when appraising, selling or mortgaging his home.
With the proper training and experience, a home inspector will perform his job with minimal, if any, flaws. But errors happen once in a while that can lead to a variety of damages incurred by the homeowner. This is when errors and omissions insurance comes into play.
For example, overlooking a damaged wiring system can lead to a house fire. Missing a section of plumbing pipes that are heading toward rupture can set the stage for a flood and widespread damage. Erroneously judging a foundation sound when in fact it is compromised can lead to serious destruction.
E&O insurance requirements
Here are some aspects governing E&O and general liability insurance for home inspectors.
- The home inspector must maintain a minimum $1 million in coverage for each occurrence in which the inspector is found to be at fault. This figure is for both E&O and general liability insurance requirements.
- Inspectors must be individually licensed; the name on the license must be that of the inspector, not of the company for which the inspector works.
- The coverage will apply only to the individual inspector, not to his or her employer.
- These insurance policies must include water ingress (damage), even if the inspector doesn’t work with water systems.
- The E&O insurance and the general liability insurance must be issued by an authorized provider with the full amount of coverage, minus any deductible on the part of the inspector, underwritten by this provider.
- The rights to all benefits described by the policy must be non-discretionary, thereby limiting or prohibiting the insurance company from making “interpretations” that could stall or prevent a settlement.
- Claims also must be non-discretionary and be adjudicated by the provider or its authorized representative.
Do you need E&O insurance?
If you’re a home inspector looking for first-time E&O or general liability insurance coverage or are already working but are dissatisfied with your current policy, keep these five points in mind:
1. Consider only providers who are experts in your specific area of service
2. When consulting with a prospective provider, obtain references from their current and/or past satisfied clients
3. Compile a list of questions and make sure the provider you’re considering can answer them in a way that you understand
4. Use your instincts when evaluating potential E&O insurance providers. It’s important that you have a good “feel” about a company before entering into an important business relationship with them.
5. Don’t be afraid to ask the providers with whom you speak how they handle claims. Remember: a good insurance carrier is on your side and is there to serve you, first and foremost.
Errors and omissions insurance can spell the difference between a swift solution to problems that arise during or after an inspection and financial and professional devastation. It’s not a “necessary evil,” but rather a foundation of protection.
Elite InspectInsure of Wayne, Pa., provides home inspectors with comprehensive insurance that covers the E&O and general liability insurance requirements. You’ll find our associates knowledgeable and ready to answer your questions about every aspect of the policies we write. We’re located at 985 Old Eagle School Road in Wayne. You can reach us by phone to schedule an appointment by calling (800) 355-1185.