I is for Insurance
In Ontario, most contracts between a real estate agent and a member of the public includes a declaration, signed by the agent, that he or she is fully insured as required by the Real Estate and Business Broker’s Act and Regulations, but do you have an understanding of what that insurance actually covers? Hopefully this post will outline everything for you.Among other licensing requirements such as continuing education credits, all real estate agents, brokers and brokerages must be insured under a group policy. The policy is issued by The Real Estate Council of Ontario and covers three significant points; Errors and omissions, commission protection and consumer deposit.
- Errors and Omissions Insurance covers agents and brokers for up to $1M in respect to any particular claim. The Policy provides protection for an agent who has or is alleged to have committed a negligent act. Coverage is also extended to include theft or damage to customers’ property during an open house while in the care, custody and control of the Insured. This coverage is subject to a limit of $25,000 and a $500 deductible.
- Commission Protection Insurance covers agents and brokers up to $100k in respect to any particular claim. This coverage provides protection for the salesperson/broker to whom a commission is owed, but not paid, due to the insolvency of an Insured or the theft, fraud, misappropriation or wrongful conversion directly or indirectly of moneys or property held by an Insured.
- The Consumer Deposit coverage is for the customer or the client of an Insured. This coverage is designed to protect the consumer but also prevents claims against the Insured who, in the absence of such insurance, would have a claim made against them. Claimants are protected for losses due to the insolvency of an Insured or the theft, fraud, misappropriation, wrongful conversion directly or indirectly of moneys or property held on deposit for the consumer by the salesperson/broker. The insurance protection afforded to a claimant due to an “Occurrence” is $100k
Agents and brokers should fully explain the Declaration of Insurance as part of their contract discussions. Not only do you show your knowledge, but you put the client at ease. For further information about Insurance coverage, please read REBBA 2002 or visit the RECO website.