Real Estate Agents: Auto Insurance Requirements

Real estate agents and brokers require insurance to protect themselves from the financial impact of property listing errors, damage to a client's home, and other costly accidents. While the specific auto insurance requirements for real estate agents vary across states in the US, commercial auto insurance is generally required for vehicles owned by real estate companies. This type of insurance covers damages, injuries, vehicle theft, weather damage, and vandalism. Additionally, personal vehicles used for business purposes should have commercial coverage.

Commercial auto insurance

Some examples of what is covered by commercial auto insurance include:

• Damage to your vehicle(s)
• Injury to someone else
• Damage to someone else's property
• Bodily injury liability
• Property damage liability
• Collision coverage
• Comprehensive coverage for theft, fire, or natural disasters
• Medical payments coverage for employees and their passengers
• Uninsured/underinsured motorist coverage
• Rental car coverage
• Personal injury protection

It's important to note that tools and materials inside your vehicle that are damaged in an accident are typically not covered by a commercial auto insurance policy. Additionally, accidents in a personal vehicle being used for personal reasons are also generally not covered.

Personal vehicles for business use

If you use your personal vehicle for business purposes, you may be able to deduct its cost of ownership and operation from your taxes. However, if your vehicle is used for both business and personal purposes, you can only deduct the cost of its business use.

There are two methods for calculating the deductible amount: the standard mileage rate method and the actual expense method. The standard mileage rate method multiplies a standard rate (67 cents per mile for 2024) by the number of miles driven for business. The actual expense method calculates the total cost of operating the vehicle and multiplies it by the percentage of total miles that were business miles.

If you use your personal vehicle for business, it is important to review your auto insurance policy. Some personal auto insurance policies do not cover business use, which means you could be liable for accidents that occur while on a work errand. You may need to purchase a separate business auto insurance policy or obtain a special endorsement covering your business use.

Non-owned auto insurance

HNOA insurance provides liability coverage for accidents involving these non-owned vehicles. It can help cover the costs of auto liability lawsuits, which can be financially devastating for a small business. This type of insurance can protect your business from expenses associated with accidents, such as medical treatment and vehicle repair damages. It is also useful if your business rents vehicles or uses employee cars for work purposes, such as during peak seasons or special events.

The cost of HNOA insurance is based on several factors, including employee driving records and policy deductible and limits. It typically costs between $200 and $500 per year.

It's important to note that HNOA insurance does not cover accidents that occur during commutes or personal errands during business hours, and it also does not cover physical damages to the non-owned vehicle. For that, you would need separate coverage.

Errors and omissions insurance

While I wasn't able to find information on whether real estate agents are required to have specific auto insurance, I did find plenty of information on errors and omissions insurance.

E&O insurance is designed to protect real estate professionals from the financial consequences of mistakes or oversights made in the course of providing their services. This includes errors on titles, property listings, or legal advice related to property purchases. For example, failing to inform a buyer about water seepage in a basement or misstating the square footage of a property.

E&O insurance is not required in all states, but it is highly recommended, as it provides crucial protection against costly malpractice lawsuits. Some states do mandate this insurance for real estate agents and brokers, and clients may also require proof of E&O insurance before entering into a contract.

The cost of E&O insurance varies depending on factors such as the size and type of brokerage, the amount of coverage, and the location. It typically covers the business owner, employees, and subcontractors.

Additional Insurance for Real Estate Professionals

In addition to E&O insurance, real estate professionals should consider the following types of insurance to protect their business:

• General liability insurance: Covers common business risks such as customer injury, property damage, and advertising injury.
• Commercial auto insurance: Covers vehicles owned by the real estate business and protects against accidents, theft, weather damage, and vandalism.
• Commercial umbrella insurance: Provides additional coverage once the limit of a primary liability policy has been reached.
• Business owner's policy (BOP): Combines general liability and commercial property insurance at a lower rate.
• Cyber liability insurance: Covers data breaches and cyberattacks, helping to protect client information.
• Workers' compensation insurance: Covers medical expenses and lost wages for employees who are injured or become ill due to work-related reasons.

General liability insurance

Real estate agents and brokers face a significant amount of legal risk in their line of work. As such, they require insurance to protect themselves from potential lawsuits. One such type of insurance is general liability insurance.

Additionally, general liability insurance covers advertising injuries, such as a lawsuit over a logo that resembles that of a competitor. It can pay legal fees related to defamation, copyright or brand infringement, and slander.

The cost of general liability insurance for real estate professionals depends on various factors, including the real estate services offered, business equipment and property, and the number of employees. Most real estate businesses pay a median of $30 per month for this type of insurance.

Frequently asked questions