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Why Real Estate Agents need Professional Indemnity Insurance

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Real Estate Agents play a crucial role in the complex processes of buying, selling and managing properties. When handling these large and often emotionally significant assets, there are potential risks and liabilities that Real Estate Agents need to be aware of. One of the ways to mitigate these risks is through Professional Indemnity Insurance.

What is Professional Indemnity Insurance?

Professional Indemnity Insurance protects professionals and their businesses against potential losses arising from actual or alleged negligence or breach of duty due to an act, error or omission in the practice of their profession.

Professional Indemnity Insurance may cover the payment of a claim, or the legal costs involved in responding to or managing the claim.

As registered professionals, Professional Indemnity is one of the first types of insurance a Real Estate Agent might consider. Let’s take a look at why.

Protection Against Professional Indemnity Claims

A Real Estate Agent may find that a claim is made against them for failing to provide service in line with a professional standard. This might arise out of contractual disputes, disagreements on valuation, concerns about mismanagement of properties or sales processes and more.

Claims may include accusations of:

Negligence
Misleading or deceptive conduct
Breach of contract
Unintentional defamation
Unintentional interference with IP rights
Breach of an Act or Regulation
Misrepresentation, or any other professional misconduct.

Even if the Real Estate Agent is not found guilty, the legal costs, damages and expenses associated with battling these claims may be significant, and Professional Indemnity coverage is critical to covering the costs involved and avoiding the potential for bankruptcy.

Professional Indemnity as a Legal Requirement for Real Estate Agents

Across Australia Professional Indemnity insurance is generally a legal requirement for Real Estate Agents. The specifics will vary from state to state.

As an example, Real Estate Agents with a licence in NSW come under the Property, Stock and Agents Act 2002 (and associated Regulations). The requirement at this time in NSW is that licensees must have “not less than $1 million for any one claim; and not less than $3 million in the aggregate, for all claims made during the period of insurance”(1).

Failure to have this insurance can result in the revocation of a Real Estate Agent's licence. It is important for Real Estate Agents to check the legal requirements in their jurisdiction and ensure they have the necessary insurance coverage.

Protecting Your Reputation as a Real Estate Agent

A Real Estate Agent is often a well known figure in a community and thrives on the basis of their professional reputation. In the event of an accusation of professional misconduct their reputation can be significantly damaged resulting in a loss of clients and income.

By covering costs involved with legal representation, a Professional Indemnity insurance policy enables a Real Estate Agent to fight alleged misconduct in an effort to clear their name. The cheaper option may be to look for a quick settlement, an approach that may look like (or require) an admission of guilt, and permanently damage an Agent’s reputation.

Professional Confidence

With Professional Indemnity coverage, a Real Estate Agent can feel confident that they have a safety net in place to protect themself, their business and, importantly, their clients against potential risks. This enables a Real Estate Agent to focus on providing a high-quality, professional service to their clients, knowing that in the event of a claim both parties can reach a satisfactory outcome.

As a Real Estate Agent, it is critical from a business, reputational and legal standpoint to be sure you are covered for your professional risks. To learn more, reach out to us at Grace Insurance. Our experience in the Real Estate sector gives us the insight to ensure that your business is covered for all of its risks, including Professional Indemnity.

“PROFESSIONAL INDEMNITY INSURANCE INFORMATION SHEET, Property and Stock Agents Regulation 2022”, Sept 2022, State of New South Wales, through NSW Fair Trading. Accessed 25/5/2023.

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General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

All information above has been provided by the author.

Aimee Henderson, Grace Insurance, ABN 63 133 156 742, AFSL 233750