And both policies should include coverage for bodily injury and property damage.
Why? We’ll explain.
But first, let’s be clear on the difference between general liability and errors and omissions (E&O) insurance. And why, as a home inspector, you need both.
What is general liability insurance for home inspectors?
General liability insurance covers accidents that happen when you’re doing your job, but aren’t part of the inspection process. And cause injury to a person, or damage to property.
Say the ladder you leaned against a wall during an inspection blows over, hitting the homeowner on the head. That could lead to a bodily injury claim. In which case your general liability policy would pick up the tab for their medical expenses. And if the claim goes to court, it’ll cover your legal fees and compensation.
If that ladder missed the homeowner, but fell on to the car they’d parked in the driveway, you could find yourself facing a claim for property damage. In which case, your policy would cover repairs or replacement.
But what general liability insurance doesn’t cover you for is any professional errors you make in the course of your work.
That’s why you need the added protection of an errors an omission policy.
What is errors and omissions insurance for home inspectors?
Errors and omissions (E&O) insurance (also called professional liability) protects your firm from claims you’ve made a mistake, or overlooked something, and it’s cost your client.
Even the most seasoned inspectors make mistakes. The trouble is, a minor oversight can have major consequences. Like a lawsuit.
Don’t believe us? Here’s a real claims example:
After inspecting a property, the home inspector recommended using a licensed contractor to further review wood deterioration found above a brick veneer.
Having bought the house, the homeowner hired a contractor to repair the corrosion and found more wood rot as well as a lack of flashing.
The homeowner sued the inspector for negligence to recoup the cost of repairs which they alleged came to over $70,000.
The matter settled for $35,000, with defense fees costing over $45,000.
Without insurance, $80,000 is going to seriously impact your cashflow. For a small business, it could be enough to put you out of business completely.
Errors and omissions insurance (or professional liability insurance, as it’s also known) protects your business from the costs of claims you’ve been professionally negligent.
If a homeowner claims you made a mistake and it’s cost them – even if the claim is groundless – your coverage picks up your legal fees. And if you are found at fault, it can take care of compensation you have to pay, too.
Why do home inspectors need E&O and GL insurance?
Okay, so the differences between the two policies seem straightforward, right? They are.
It’s just that for home inspectors, it’s vital you make sure your E&O policy includes claims for bodily injury and property damage, too.
That’s because there’s always a risk of accidents happening which are down to professional negligence.
The ASHI Reporter gives a really scary example which neatly explains this:
An inspector’s report states an elevator is working. Sometime later, a child is crushed to death in the elevator and the inspector is slapped with a claim for bodily injury.
Now, the child didn’t get crushed while the inspector was on-site, doing the inspection. The accident was caused by the inspector’s negligence (failing to report the elevator was unsafe). Which means the claim falls under errors and omissions, not general liability insurance.
The problem is, if the home inspector’s errors and omissions policy doesn’t include bodily injury coverage, their insurer only has to pay out on the cost of repairing the elevator. Not for the damage done to the child.
So, to be fully protected, home inspectors need E&O and GL insurance. And both policies should include coverage for bodily injury and property damage.
Make sure your coverage passes inspection
To make sure you’ve got the right protection, before you buy a policy, ask questions like:
Am I covered for property damage?
For example, say you report a roof is nearing its life expectancy, but don’t note it’s missing shingles and the dormer hasn’t been fitted properly, so it leaks. After buying the house, the homeowner sues for repairs to the roof and the cost of replacing carpets and wallpaper in the rooms below. Is this covered?
Does my policy cover the cost of temporary accommodation?
Say you miss a structural issue in your inspection report. You get sued by the homeowner and as part of the settlement, the court orders you to pay for them to stay at a hotel while their house is repaired. Will your policy cover this cost?
Am I covered for bodily injury?
What if, shortly after moving into a new home, the homeowners and their guests are injured when the deck collapses. You get sued for damages because the rot that caused it to collapse wasn’t identified in your report. Will your policy cover the homeowner’s medical bills?
How much does home inspector insurance cost?
Compared to what a lawsuit will cost you? Not very much. But when you start looking around, you’ll probably find the cost of E&O and GL policies can vary enormously from insurer to insurer.
The reason for the different prices is usually because of the level of coverage offered.
Most policies start out the same, paying for claims made against you. Then you’ll find there’s a list of exclusions – the ‘except fors’.
The more the policy excludes, the less you’re likely to pay for it. Which is why, if bodily injury and property damage claims are excluded from your errors and omissions policy, you’ll probably find it’s cheaper.
Home inspector insurance tailored to suit you
Trouble is, you don’t always get to find out what’s excluded until after you’ve received your policy documents. That’s why it’s a good idea to ask questions before you buy.
Even better, get yourself a tailored package of coverage designed specifically for home inspectors, from a broker who understands your business needs.
InsuranceBee can help take some of the headache out of the insurance-buying process for you. With combination home inspector policies starting at $89 a month* we can find you an insurance package to suit your exact business needs. And it only take a few minutes.
*based on a 20% down payment and 9 monthly installments.
Image used under licence from Shutterstock.