Commercial Real Estate Insurance: How to Find the Right Policy

Commercial real estate insurance can protect you and your business from costly litigation fees. By their very nature, real estate companies are subject to a number of potential risks, lawsuits, and claims.

Real estate professionals undoubtedly work hard to keep their clients informed every step of the way, but information slipping through the cracks and innocently overlooked errors can lead to costly, time-consuming lawsuits.

Furthermore, working in real estate typically means overseeing and facilitating massive deals and transactions – which can lead to major negative consequences for your business should something go awry. 

All of this means that lawsuits against real estate professionals are fairly common. Unsatisfied clients may bring forward a suit alleging failure to disclose property defects, negligent misrepresentation, missing necessary disclaimers, misreporting boundary lines, and a host of other issues that could arise when a property changes hands.

However, issues with real estate transactions and clients aren’t the only type of liability real estate companies face.

For instance, if a client slips and falls on your premises or an employee is injured at work, the business would be liable.

Over the course of doing business, any number of unfortunate accidents and injuries can occur due to human error or simply bad luck. 

Similar to how unforeseen accidents can lead to bodily injury and subsequent litigation, property damage can be devastating for real estate companies.

According to a recent report on property insurance, the impact of recent natural disasters will greatly affect the commercial property market in the coming years, particularly when it comes to property and assets located in areas at risk for wildfires, floods, and hurricanes.

From fires and hurricanes to burst pipes and vandalism, the right real estate insurance program can provide sufficient protection for your property.

If you are ready to get your real estate insurance quote, sign up to Embroker’s risk-free platform, tell us more about your business, and receive your quote in just a few minutes.

Who Needs Real Estate Insurance?

Most licensed real estate professionals will need to consider purchasing business insurance. Securing coverage is essential if you or your employees work as:

• Licensed real estate agents (buyer’s and seller’s agents, as well as dual agents)
• Brokers
• Property managers
• Appraisers
• Additionally, real estate insurance is crucial for property developers and landlords.

The right real estate insurance package can help cover any costs incurred during construction or renting, including loss or damage to the property itself, any equipment used, and public and private liability claims.

What Real Estate Insurance Policies Do Companies Need?

While every business has a specific set of real estate insurance needs, there are typically core insurance policies that real estate companies should obtain in order to mitigate and transfer risk.

For your real estate insurance package to provide adequate protection, you should consider securing:

General Liability Insurance:

A general liability insurance policy provides real estate companies with protection from injury claims, advertising claims, and property damage claims.

It will also cover defense costs in a lawsuit brought against you, including court costs, witness fees, and attorney fees, in addition to judgment or settlement monies.

Commercial Property Insurance:

This policy protects property owned by the business such as buildings, contents, equipment, and personal property used in the business from perils of fire, theft, and natural disasters.

Additionally, commercial property insurance often provides coverage for losses of income caused by these perils.

Business income coverage is not sold as a stand-alone policy but can be included with the business’s property insurance policy.

Errors and Omissions (E&O) Insurance:

Real estate E&O insurance protects against client lawsuits for errors, omission, or failure to perform during a property development process or a real estate transaction that resulted in financial losses for the client.

The right E&O policy can protect your assets and cover the legal costs, should a suit be brought against your company.

The high potential for expensive service-related losses makes this policy a key component of your real estate insurance package.

Inland Marine Insurance Policy:

Inland marine insurance will cover any materials and equipment from losses while transported on land. The policy is meant to protect movable business property.

The policy is crucial for real estate companies during the development, renovation, or adaptation of any business property.

Builders Risk Insurance:

Builders risk is a type of inland marine policy that insures the structures that your company is building along with all of the materials that are onsite.

Companies are able to buy these types of policies on a per-project basis and they will usually cover damage caused to the site and all materials on site caused by inclement weather, natural disasters, fire, and vandalism.

Owner Controlled Insurance/Contractor Controlled Insurance Policy:

Also referred to as “wrap-up insurance,” these policies are purchased by the owner or general contractor of a development project on behalf of all the participants, such as the contractors, architects, and engineers.

A wrap-up policy addresses the gaps in coverage between all parties by serving as an all-encompassing policy.

Although an OCIP/CCIP may be set up in a variety of ways a policy package usually contains, at a minimum, commercial general liability coverage and workers’ compensation to protect the property owner and other interested parties.

Depending on the project, there may be endorsements providing additional coverage such as pollution liability, builders risk and professional liability.

Having one common insurance policy streamlines the claims process and decreases the possibility of disputes and liability lawsuits between the various parties.

Environmental Policy:

Environmental or “pollution liability” insurance addresses the coverage gap that exists because many standard CGL policies have a pollution exclusion.

Common exposures only covered under this type of policy include asbestos, mold, lead paint, and other pollutants.

Workers Compensation Insurance:

Employees can be exposed to risks related to your business’s daily operations.

If someone from your staff is injured in the workplace, workers compensation insurance will pay for medical care and lost wages.

Additionally, workers compensation is typically compulsory in most states, with the notable exception of Texas.

Employment Practices Liability Insurance (EPLI):

EPLI provides protection against employee claims related to issues such as wrongful termination, harassment, and discrimination.

With the rise in employment-related litigation, it’s wise to have Employment Practice Liability insurance.

Real estate companies offering professional services are also strongly encouraged to get third-party coverage to protect against claims coming from outside the firm, such as claims made by clients.

Cyber Insurance incl. Data Breach:

Most real estate companies keep detailed records of their clients’ personal information.

Your business is legally liable to protect this data and the right cyber insurance policy helps mitigate the risk of losses that can result from being hacked or experiencing data breaches.

Commercial Auto Insurance:

Vehicles are important for the work of property developers and real estate professionals, and all of the cars, trucks, and vans that are used in your business should be covered in your insurance program.

A commercial auto insurance policy provides liability coverage that will pay for damages to third-party property or injuries resulting from accidents involving your business vehicles.

You’ll also be able to get coverage for any medical bills of your own and damages that your vehicles may incur.

Crime Insurance Policy:

Real estate professionals often work with and vouch for valuable property and assets, whether buildings, equipment, sensitive information, or even client funds.

Crime insurance will respond to losses caused to these assets by criminal activities, whether committed by employees or bad actors from outside the company.

It will cover both the losses themselves, as well as defense costs and settlements if you’re held liable for damages to third parties.

You should also consider title insurance, which we cover in a separate article. You should also read our post about common risks in real estate.

What Does It Cost?

A frequent question we hear (and a common problem with insurance underwriting in general) is that no one really knows how an underwriter arrives at a premium.

When applying for real estate insurance, there are many factors that carriers take into consideration while underwriting new coverage.

Cost drivers will always be different based on the policy type, limits needed, the size of your company, the number of employees working for you, the locations of your property, and more.

Working with the right partner will ensure they are not only negotiating the right coverage but the best possible pricing options for your company.

Embroker believes in giving our clients better choices using data and transparency.

We benchmark your policies against similar companies in your vertical, then procure quotes from multiple insurance carriers for coverage you may not carry and want to consider purchasing.

We also cross-reference your costs with companies of comparable size, policy limits, claims history, and risk tolerance so we know your premiums are as competitive as possible.

Once set up on our platform, our tools and data ensure you’re adequately covered and get the best value possible in the insurance marketplace, even as market conditions change and your business grows.