Whether your state requires it or not, you should have insurance.
Home inspectors should be insured for many reasons. First and foremost, insurance will protect you in the event of a mistake, or something going wrong on the job.
Homebuyers have a lot at stake in real estate transactions, and unfortunately, that puts home inspectors at risk for lawsuits. Insurance coverage is the best way to protect yourself from the worst-case scenario. Before you buy insurance though, you should understand what it covers (and what it might not). Here's our guide to insurance coverage for home inspectors.
Errors and omissions insurance (often referred to as E&O insurance) is a specialized professional liability insurance policy that protects you and your business if your client claims negligence or carelessness in your work.
For example: let's say you missed hidden water damage in your inspection and it led to costly repairs for the homebuyer. The homebuyer is angry and decides to sue you for negligent work. E&O insurance will cover some of the costs that fall to you in a worst-case scenario like the one detailed above, such as legal fees or a settlement.
E&O insurance won't cover damage or accidents on the job, but that's what a general liability insurance policy is for.
If you have E&O insurance, why do you need general liability insurance? Well, the two policies are quite different.
A general liability insurance policy will primarily cover accidents that happen on the job.
The two big categories of general liability are bodily injury and property damage. They're both relatively self-explanatory; if a client trips over your equipment, injures themselves, and files a claim, bodily injury will help cover medical costs. The same rules apply to property damage.
General liability can also apply to less likely scenarios, like reputational harm and copyright infringement. However, as a home inspector, it's unlikely that you'll run into those scenarios.
Errors and omissions coverage and general liability coverage should give you enough protection as a home inspector. Here are a few more types of insurance to consider if you want to be fully protected.
Some states do require the following policies, so be sure to check your local laws and requirements.
Do you drive a vehicle solely for your job? A commercial auto insurance policy could be a good addition to your insurance coverage as it provides property damage/bodily injury liability, uninsured motorist coverage (UM), comprehensive and collision coverage, and medical payments.
A business owner's policy (BOP) is usually comprised of three parts: general liability insurance, business income insurance, and commercial property insurance. We covered general liability above, but let's break down the other two coverages.
Business income insurance will help you recover income in the event you cannot operate due to damaged property or equipment.
If you rent or own office space (or other commercial property), commercial property insurance will keep you covered in the case of certain, specified events. This type of insurance will also cover the property you bring to inspections, such as your toolkit. An important note here: not all events are covered, so be sure to discuss with an insurance professional to understand how commercial property insurance protects you.
Last but not least, worker's compensation insurance is a must for multi-inspector firms or inspection companies with one or more employees.
A worker's compensation policy will cover employees in the event of an injury on the job. While this is required in most states, you are often able to opt yourself out as the business owner. And while you can purchase worker's comp for yourself in most states, you don't need to.
Even if it's not required in your state, you should absolutely get insurance coverage as a home inspector. An insurance policy will protect you in the event of a worst-case scenario and give you peace of mind on the job.
The cost of insurance will depend on what type of insurance policy you purchase and your coverage levels. For example, an E&O insurance policy can cost anywhere from $600 to $1,200 per year. Every state has different insurance requirements, so check yours before choosing a policy.
Accidents happen, but there are ways to be prepared when it comes to liability. Make sure your pre-inspection agreement is rock-solid, and know where you might be at risk. InterNACHI put out this YouTube video about claims against home inspectors, and we think it's worth a watch for every inspector.