When is Errors and Omissions Insurance required for a real estate agent?

Errors and Omissions Insurance (E&O Insurance) is designed to protect real estate agents from claims made by clients or other parties who believe that the agent has made an error or has been negligent in their professional services. In Texas, the requirement for maintaining E&O insurance is specifically tied to the interest a real estate agent holds in a business.

When the agent has less than 10% interest in a business, the requirement for E&O insurance becomes relevant, as this interest level indicates a lower level of exposure to risk and liability. In this case, having E&O insurance serves to protect both the agent’s personal assets and the interests of their clients against any potential mistakes or omissions that could arise during real estate transactions.

This coverage is beneficial for agents as it helps maintain professional credibility and provides a safeguard against suits that may risk their financial stability. Thus, agents who hold a smaller interest in a business may be required to carry such insurance to ensure that they are adequately protected in their professional endeavors.