Thread: What is the typical amount of insurance

I wanted to know what is the typical amount, and types of insurance most HI's carry?

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I carry the minimum the State requires me to 500K

We carry $2 million E&O and liability.

what kind of homes do you inspect, talking price range.if you do million dollor homes, $1million, if your top is 500k, then 500k, and so on.

charlie

Thanks for some feedback. Well do any of you carry general liabilty along with e & o, or just one or the other?

both. and your cost on insurance will depend on your experience and if you have ever been before perry mason before

charlie

Originally Posted by CHARLIE VAN FLEET

what kind of homes do you inspect, talking price range.if you do million dollor homes, $1million, if your top is 500k, then 500k, and so on.

charlie

I always, assumed/ figured it wasn't how much the home cost, but how much it would cost to defend us in the event of a major injury, or the worst a death, if we missed something that caused it.

dan

thats cool, but my life is worth more then a million.{I THINK} so will we ever be covered enough. so how do you determine. i have 1 million and have never seen mr mason, but you never know. i still feel let your insurance company advice you. i found mine was honest and tried to lead me professionally. they could have told me 2 million, just to make money.
first time or new inspectors will pay an arm and a leg for big insurance, i guess it's a individual issue. my insurance company gave me the advice on the size of homes i inspected, and i started at 500k and have now moved up because i,m doing million plus now.

be a good inspector and if you do a good job and the people like you, they won't sue you. thats an ASSUMPTION.

CHARLIE

I have the min E&O that is required in the states I have a license in. I have a 2M GL that I have had for about 15 years.

Having done litigation work for about 10+ years, I have never seen a HI payout more than $75K. Sure you hear about those big ones, but those are usually shotgun type lawsuits that get everyone involved in the sale of the home!

Think about it for a moment and you will realize that it would take a major problem with multiple lawyers, lasting several years to reach that magical 1M number that so many folks have for E&O coverage.

Also get as high of a deductible as possible. I have a $5K deductible and would not have anything else. FYI, most HI lawsuits payout around $10K to $15K..... Some are even less. Very few are over the $25K range when it is said and done with.

E&O and General Liability are two different animals and provide different protection.

Some states require one or the other or both. Some states have no requirements. My state laws just changed so I must carry GL and have $17,500 in assets or have E&O. My lawyer strongly recommends E&O.

I carry GL. At last weeks assoication meeting, someone mentioned he found a company that can provide 1mil E&O for $1200 a year with 5K deductable. At that price, it seems reasonable to carry E&O.

It is a business decision. Some have tried to imply that carrying E&O somehow makes your a bonified or legitimate home inspector. They also imply that if you do not carry E&O, then you are a fly by night operation. Horsey hockey.

BRUCE

most clients i get and real estate agents always ask me if i have insurance and bonded. and i advertise that i have it . why would they not want to be protected. like crashing your car into someone who is uninsured. try getting you money from you insurance company on the no-fault issue. it doesn't make you a home inspector, it makes you a protected home inspector and protects your assets and family. not sure if your thread indicated you do not carry it or not. BUT I DON'T LEAVE HOME WITHOUT IT.

plus if you are to get E & O insurance, you have to prove to your insurance company that your are qualified home inspector or have taken some effort to be one

charlie

your first four inspections a year cover the cost

Originally Posted by Bruce Ramsey

Some have tried to imply that carrying E&O somehow makes your a bonified or legitimate home inspector. They also imply that if you do not carry E&O, then you are a fly by night operation. Horsey hockey.

Bruce,

I guess I was not a "bonified or legitimate home inspector", I must have been "a fly by night operation", at least according to those people, as I NEVER carried any E&O.

$2 mil GL, yes. I started with $550k GL, went to $1 mil as it was not much more (something like $65 per year more if I recall correctly), then went to $2 mil GL as it was very little more than $1 mil GL (another $35 per year more or something ridiculous like that).

Originally Posted by CHARLIE VAN FLEET

BRUCE

most clients i get and real estate agents always ask me if i have insurance and bonded. and i advertise that i have it .

plus if you are to get E & O insurance, you have to prove to your insurance company that your are qualified home inspector or have taken some effort to be one

charlie

I operate in a licensed state. The license implies that I am qualified inspector because the state says so. I tried to get a bond but was told by several bonding agencies that it was not offered in my state. General liability protects the seller from damage I may cause. In my area of operation, few inspectors carry E&O and I have never had a client or agent ask.

Bruce....

The changes in North Carolina require (as one option) that you have not less than $5,000 in net assets. The $17,500 you cited is for a General Contractors license.

SECTION 2.2. G.S. 143-151.51:
"§ 143-151.51. Requirements to be licensed as a home inspector.
(2) One of the following:
a. Minimum net assets in an amount determined by the Board, which
amount may not be less than five thousand dollars ($5,000) nor more
than ten thousand dollars ($10,000).
b. A bond in an amount determined by the Board, which amount may
not be less than five thousand dollars ($5,000) nor more than ten
thousand dollars ($10,000).
c. Errors and omissions insurance in the amount of two hundred fifty
thousand dollars ($250,000), which insurance may be individual
SL2009-0509 Session Law 2009-509 Page 3
coverage or coverage under an employer policy, with coverage
parameters established by the Board."

Stay away from Bonds!
Why? For starters they do not offer you any protection if you break something in a persons home and you have to pay for lets say an entire home of wood floors that were damaged when you let the upstairs tub overflow!

Also, they are attached to a form of security. The security is usually your home! So if the bond pays out and you don't pay the bond company back then they take your home!

You can get business general liability insurance from most insurance providers. Check with the company that has your home and auto insurance, you might be surprised at just how inexpensive it is.

Originally Posted by Dave Hahn

Bruce....

The changes in North Carolina require (as one option) that you have not less than $5,000 in net assets. The $17,500 you cited is for a General Contractors license.

SECTION 2.2. G.S. 143-151.51:
"§ 143-151.51. Requirements to be licensed as a home inspector.
(2) One of the following:
a. Minimum net assets in an amount determined by the Board, which
amount may not be less than five thousand dollars ($5,000) nor more
than ten thousand dollars ($10,000).
b. A bond in an amount determined by the Board, which amount may
not be less than five thousand dollars ($5,000) nor more than ten
thousand dollars ($10,000).
c. Errors and omissions insurance in the amount of two hundred fifty
thousand dollars ($250,000), which insurance may be individual
SL2009-0509 Session Law 2009-509 Page 3
coverage or coverage under an employer policy, with coverage
parameters established by the Board."

You are correct. I was remembering the numbers that were being thrown around during the intial negoiations of the law change. The realtors started at $35,000, backed down to $17,500 and when the law was enacted it was min 5k and max 10K.

Note you left out part 1 which states we must also carry GL of not less than $250K

(b) License. – Upon compliance with the conditions of licensure under subsection (a) of
this section, to be eligible to be licensed as a home inspector, an applicant must meet all of the
insurance requirements of this subsection.
(1) General liability insurance in the amount of two hundred fifty thousand
dollars ($250,000), which insurance may be individual coverage or coverage
under an employer policy, with coverage parameters established by the
Board.
(2) One of the following:
a. Minimum net assets in an amount determined by the Board, which
amount may not be less than five thousand dollars ($5,000) nor more
than ten thousand dollars ($10,000).
b. A bond in an amount determined by the Board, which amount may
not be less than five thousand dollars ($5,000) nor more than ten
thousand dollars ($10,000).
c. Errors and omissions insurance in the amount of two hundred fifty
thousand dollars ($250,000), which insurance may be individual
SL2009-0509 Session Law 2009-509 Page 3
coverage or coverage under an employer policy, with coverage
parameters established by the Board."

E & O are required here in WV But not GL. Being a Commercial Construction Co. owner for thirteen years I can't imagine not carrying GL on any type of business I operated. I carry a combonation plan that has both buit if I had to choose I'd always go with the GL.

Watch out for GL policies that you get from companies that aren't HI specialists. I had one for years, paid very reasonable premiums, then one day I sat down and read the darn thing. Wow! The policy was written for a standard brick-and-mortar business, and covered injuries and damages that happened on my business premises! No coverage for anything that happened anywhere else! I now buy my GL from the same company that supplies my E & O. At least they understand that a home inspection business is not the same as a shoe store!
Detroit Matt

On a side note: You really do need an independent GL policy. The ones that are sold by the E&O providers might not cover you away from the property that you are doing the inspection on. Or they only cover you while inspecting that particular home.

My E&O coverage also includes a GL policy, but it is only good when I'm doing an inspection at that home. This is why I also carry a $2M umbrella GL policy from a large insurance company, it covers me and my business 24-7.

A good example would be this: You inspect a home and leave the oven on. The home burns down 4 days later. 90% chance that the GL policy that is built in with an E&O policy will not cover this loss. An independent GL policy would cover it.

I've been asked about bonding once. In VA, bonding is on theft or other illegal activity and for employees only. An individual, as a sole proprietor or partner, is not bonded. I suppose if you were a incorporated business, you would be an employee and therefore may be bonded. If you are a VA state certified home inspector, you are required to carry a minimum of 250K of GL. I ended up going to my home owner insurance company, The Hartford, for the GL and it was really easy to do over the phone. The highly advertised home inspection insurers want to sell E&O with GL a cheap or free extra. The cost of GL alone from them was outrageous and the company I was using only had an application for E&O, which had a lot of questions that had nothing to do with GL but still had to be filled in.

Originally Posted by Stuart Brooks

I've been asked about bonding once. In VA, bonding is on theft or other illegal activity and for employees only. An individual, as a sole proprietor or partner, is not bonded. I suppose if you were a incorporated business, you would be an employee and therefore may be bonded.

What you are talking about is a fidelity bond. They are useless and do not protect you in any shape or form.

Folks think of GL and E&O in the wrong way. It is to protect you the home inspector and not your client or anyone else.

Again, stay away from bonds! You can lose your home if you can't pay it back and the bond company has to pay out on it.

SP: What you are talking about is a fidelity bond. They are useless and do not protect you in any shape or form.

True. But the multi-inspector corporations will have some protection because they may be held liable for the employee's illegal actions while on the job.

SP: Folks think of GL and E&O in the wrong way. It is to protect you the home inspector and not your client or anyone else.

True - I have an call every once in a while where the caller wants to know if I carry E&O or something to that effect. I tell them no, and if they are really concerned about that, he or she should look up one of the franchised or national inspection companies that employ multiple inspectors, they carry it for good reason.

SP: Again, stay away from bonds! You can lose your home if you can't pay it back and the bond company has to pay out on it.

Thanks - good to know

John Remark-First Indemnity Insurance here-

To determine how much insurance to carry-

1) If you do not value e and o insurance, but your state requires it, get the minimum

2) if you value the insurance-then this is the general breakdown-

65% of the cases are going to be less than $100,000
80% of the cases are going to be less than $250,000
90% of the cases are going to be less than $500,000
99% of the cases are going to be less tha $1,000,000

the decision on what to carry is based on how risk averse you are. Insurance is a means of managing risk. Pay a little all the time, make the cost predictable.

When choosing an insurance carrier-- there are other things to consider-
Is Home Inspector e and o a specialization of company or just an add on to their misc e and o portfolio.

are there any add on the policies that you are looking for?
First Dollar Defense
Soft Commercial Coverage
Automatic Referral coverage
Defendents reimbursment
Disciplinary Proceedings Up To $10,000 Per Policy Year No Deductible

This is just a sampling... you need to shop and compare not just price, but coverage.

Good luck on your search!

John Remark
First Indemnity Insurance