The world of real estate owners, property managers, developers, and investors includes risk associated with construction, property costs, economic volatility, catastrophes, and workers’ compensation. As a real estate professional, you need to feel confident that the property you manage or own is protected.
What Insurance Policies Do Real Estate Companies Need?
While every business has a specific set of insurance needs, there are typically core insurance policies that real estate companies should obtain in order to mitigate and transfer risk:
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.
Error and Omissions Insurance: Real estate E&O protects against clients 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.
Builder’s Risk Insurance: This 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 onsite 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 a 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, builder’s 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 working on the development project together.
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.
Worker’s 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: 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 policies help 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 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.
Examples of Insurance at Work for Real Estate Companies
- California’s devastating wildfire season could cost as much as $19 billion in property losses, according to estimates by CoreLogic.
See: Camp, Woolsey wildfires property losses could reach $19 billion
- A commercial property owner in Houston filed a lawsuit against the Twin City Fire Insurance Company (Hartford) after its insurance was wrongfully denied. According to the lawsuit, Twin City’s claims-handling process resulted in a wrongful denial that omitted a wealth of facts, physical evidence, obvious wind damage, and meteorological data from Hurricane Harvey supporting the plaintiff’s claim.
See: Houston Commercial Property Owner Files Hurricane Harvey Damage Insurance Lawsuit
- A Colorado based real estate settlement company suffered a hacking attack that allowed fraudsters to re-route a $272,000 payment for a piece of property to their own account.
See: Hackers Target Real Estate Deals, with Devastating Impact
- Corcoran Sunshine Marketing Group filed a $30 million suit against the developers of a supertall New York condominium, claiming the brokerage was terminated without warning.
See: New York Condominium Developers Sued for $30 Million
Real Estate Insurance Costs
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 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 getting the best value possible in the insurance marketplace, even as market conditions change and your business grows.
Now that you have a better understanding of insurance for real estate companies, you may be wondering how all of this affects your business and where to go from here. If you need more help or information, you can reach out to our team of expert brokers. If you prefer to get started on intelligent quotes, create your Embroker account today.
Real estate professionals and companies require unique insuring expertise and experience. Our real estate practice is redefining the way insurance is purchased, combining technology with deep insurance expertise and genuine understanding and care for your business.
Embroker is the easiest way to intelligently insure any business. We’re here to help!