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REALTOR® Emeritus |  | Risk management Insuring Against Risks | | ||
|  Three Lines of Defense Against Risk Keeping Risks Under Control Controlling Transaction Risks Agency Disclosure Avoiding Antitrust Risks Minimizing Liability from Contracts Fair Housing Risks Controlling Personnel Risks Communications Policies to Minimize Risks Insuring Against Risks More Resources: Controlling Business Risks Code of Ethics: Controlling Business Risks | 3 Factors in Choosing an Insurer John Williams, an underwriter with the Mason Insurance Group in Chicago, Ill., recommends investigating the following when selecting an insurance company and evaluating policies: 1. Company history. Check an insurer's financial strength and claims-handling record through rating organizations such as A.M. Best or Standard & Poor's. 2. Competitive rates. Ask your insurance agent to get at least three quotes when rebidding your insurance coverage. 3. Expertise in the type of insurance you are purchasing. An errors and omissions insurance agent, for example, needs expertise in both real estate and malpractice insurance. TIP: While premiums are sometimes lower if you buy all of your insurance from one carrier, be sure you consider all aspects of the service and coverage provided before choosing a company. 5 Ways to Evaluate Coverage Don’t let price be the only factor you look at when buying insurance. 1. Deductibles and limits of liability. Zero-deductible liability policies are expensive, but some companies need them because they don't have cash on hand to meet a large deductible if a claim arises. Companies with large cash reserves can afford a higher deductible. In those cases, it's better to use the money to increase the limit of liability rather than to decrease the deductible. 2. Type of coverage. Is the policy occurrence-based or claims-made? If possible, consider offering occurrence-based E&O insurance for your associates. Occurrence-based policies cover associates for any past transaction that occurred while they were with the company, even if they leave. Claims-made only covers associates who are with the company when the claim is made; if they’ve moved to another company, they have no insurance coverage but may still be liable. Offering occurrence-based E&O insurance can be a great marketing tool. —Greg Reynolds, Cascade Inc. REALTORS®, Sarasota, Fla. 3. Premium costs. Cost of coverage varies, depending on the characteristics of each applicant. Premiums may be based on gross revenues of the applicant, claims history, years of experience, and participation in continuing education. 4. Conditions. The conditions section of a policy includes guidelines for cancellation or nonrenewal, conditions to be met before coverage is tendered, premium structure, the insured's responsibilities when a claim arises, the insurance company's right to inspect and audit during the claims process, and definitions of terms used in the policy. 5. Exclusions. It's important to review what's not covered in a policy. A major exclusion in all policies involves claims arising from fraudulent or criminal activities committed by or with the knowledge of the insured. Adapted from "Risky Business," Jim Manke, Minnesota REALTOR®, Minnesota Association of REALTORS®, Spring 1990 TIP: Start investigating coverage several months before your deadline; it takes time to get complex quotes. 5 Tips for Selecting the Right E&O Carrier > | |