Originally Posted By: Chris Butler
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Igor,
thank you for your reply. Yes, price is always the thing we seem to revert to first unfortunately, no matter what we buy. It’s instinct, no one wants to pay a higher price if one can be had for a lower cost for the same or similar item. But that is the quandary we face then as you pointed out “what is the difference of services?”
Please find an article outlining what you should be looking for from your Professional E&O provider or any provider for that matter for any insurance.
10 REAL Questions to ask your E&O Provider
By Chris Butler
1. Are you covered under a ?claims made? or an ?occurrence? policy?
Several months ago The Communicator magazine published an article comparing the two types of coverage. Both provide adequate coverage and although the purveyors of occurrence policies like to scare you into believing ?claims made? policies don?t protect you when you retire, they do not tell you that ?claims made? carriers offer tail coverage for such an eventuality. The real difference is the price. If you compare the price of a ?claims made? versus an ?occurrence? policy, the ?claims made? wins hands down, saving you many thousands of dollars over comparable periods. Don?t be fooled into believing that ?occurrence? is any better than ?claims made?. Carriers much prefer you to obtain ?occurrence? policies because they collect significantly more premium dollars from you. Get the full story first and make a decision based on all the information, not just what one particular insurance agent gives you.
2. Are you using an A++ rated carrier?
Ratings of insurance carriers are important to both you and your insurance company. A rating is there to help the consumer determine whether or not the insurance company is actually going to do its job when a claim arises. The higher the rating, the better the company and their response to your claim. AM Best is an insurance-rating agency which provides the most comprehensive guide to insurance carriers and the way they respond to their obligations to policyholders. A++ and A+ are rated superior. A superior insurance company is one you want in your corner when a claim is made against you.
3. Are you using an admitted carrier?
An admitted carrier is one which is permitted to provide insurance in all 50 States. Some say a non-admitted carrier allows flexibility to the customer because they are not beholden to any particular state law because they use surplus lines policies. But the only entity a surplus lines policy helps is the insurance company who is not obligated to follow any rules that the individual state requires. And that doesn?t sound so bad sometimes, but when you have a claim, this same non-admitted or off-shore carrier might no longer be around to help you out. Using surplus lines means that the insurance company believes you to be an extra-high risk. Also of great importance is if the company you?re using can actually do business in your state. Some companies will not write in certain states. You should use a carrier that doesn?t discriminate against you simply because you chose to live in one state rather than another.
4. How much is my deductible?
Low deductibles are crucial in your analysis of what kind of policy works best for you. Most claims can be settled for $5,000 or less, so why do you want a $5,000 deductible or even a $2,500 deductible? You may as well be self-insured. Look for a policy which not only offers the most competitive rates, but also the lowest deductible available which usually is a $1,000.
5. Are my rates based on location?revenues?the number of inspections I perform?
We all know that E&O for home inspectors is becoming more and more expensive. Some carriers actually charge you more based on the amount of revenues you bring in, basing their rates on the amount of money you earned in the previous year. It?s like being penalized for success. Your policy should be there to help you manage your business in the most efficient way possible, not to punish you for being successful.
6. How quickly can I get a quote?
As a home inspector, your time is valuable. If you have assignments already booked you need to know as soon as possible if the underwriter is going to approve your E & O application. You cannot afford the luxury of waiting days or weeks to know if you will be covered or not. When you?re ready to do business, you?re ready to do it now. You should be looking for a company that is ready to quote with the actual price the same day you call. Ask if the company has a fulltime underwriter on staff; be very wary of brokers or agents who obtain requests from you and then ?shop? your applications around, hoping they can make a commission out of you by finding some obscure offshore carrier to write your policy. Do not pay an agent or broker in advance if they cannot give you a firm quote right away.
7. As an E&O provider, have you been consistent and do you have a strong track record?
A lot of companies claim to have been writing E & O for appraisers and home inspectors for years. But has the coverage been consistent? Find out the background and history of the E&O provider. Have they ever been dropped by their insurance companies? Are they unable to provide blanket coverage across all 50 states? Have they been through periods when they were unable to write any new business? Have they only just started writing E & O for appraisers and home inspectors? Make sure you go with a provider who is an experienced and reliable group. You deserve to know the company you?re with because you need to have the confidence that they will be there for you when you need them.
8. If I?m new to the industry, can you help me?
New Inspectors in the Home Inspection industry find it notoriously difficult to get E & O coverage. With respect to home inspectors, many insurance providers will not write new recruits to the industry. The Catch 22 is that you can?t get insurance without experience and you can?t get experience without insurance. If you?ve spent your time, effort, and money properly educating yourself on the right way to do home inspections, you need a company that will recognize that and help you get started. Not just with providing you E&O, but also the tools necessary to market yourself to new clients.
9. Will this policy cover me for commercial and residential properties?
Certain states have certain requirements as to what is considered commercial and what is considered residential property. Certain insurance companies and their policies will not cover you for both or will charge you more for working with commercial properties. You should have a policy that doesn?t delineate between the two especially considering a 3-unit condo is considered a commercial property in some states and 4 units are listed commercial in the state next door. You shouldn?t have to worry whether or not you may be covered or if you?ll be charged more by your insurance company.
10. Do you offer any added benefits along with the E&O insurance?
Insurance companies are insurance companies. They want your business; they want your money. If you?re going to spend your money on insurance, why not get something in return like benefits that you can use in your personal and professional life. Benefits like marketing tools, fidelity bonds, and third-party coverage, group health coverage, continuing education, discounts on tools, discounted overnight shipping etc. - things that make you valuable to your customers and help your business succeed.
I hope this helps.
Sincerely,
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Chris Butler
(former) Director of Membership @ FREA