“Good or bad” insurance coverage is subjective and varies from individual to individual. It’s best to look at real-world risks and weigh your personal ability to handle them without insurance and then consider how much help you really need.
For example, let’s say that you failed to identify in your report that a roof was improperly installed and, after you inspected it, high winds zipper and/or blow off large sections of shingles and the insurance company refuses to cover the loss and pay anything to your client because of the improper installation - an exclusion named in almost all property insurance policies.
A new roof will cost, in this case, about $14,000.00 (as is the case in a present claim against a home inspector). Your client, unable to be indemnified through their home insurance, expects you to pay for it, claiming that they paid you to report to them the condition of the roof and you failed to report this important, costly, and relevant defect to them.
How much of that $14K can you pay out of your pocket in one lump sum? With any E&O insurance coverage, you will pay the amount of your deductible out of your own funds. Thus, if you cannot afford to pay all or most of $14K, you will want to have the lowest deductible, which will require you to have a higher premium.
You also need to look carefully at the policy’s language to see what it does and … importantly, it does not … cover. For example, E&O insurance policies will often exclude covering claims against you for “fraudulent acts” which would include any lawsuit claiming that you conspired or otherwise assisted the real estate company in covering up a defect out of fear of “alarming” the buyer or risking future referrals from the agent. For this reason, you always want to clearly show a thick wall separating yourself and your business from those who benefit from the sale of the home so that your errors cannot be credibly alleged as fraudulent. You will want to study the language in the policy to see if coverage ends with the allegation or with the proof of fraudulent acts, as well.
E&O policies will also include exclusions of coverage for “false advertising” which is why you want to make no claims in any of your advertising materials (digital or otherwise) that you cannot prove. If you are sued for lying or misrepresenting your qualifications or services, your E&O provider can refuse to cover you no matter how credible the claims are or high your premiums are. An exclusion is an exclusion. They cover it or they don’t. Most don’t.
Many policies will also exclude coverage for lawsuits against you for breach of contract. As a matter of course, most insurers will require that you have a contract and many will review it before approving coverage. Accordingly, their agreement to cover you is contingent upon your agreement to comply with the contract. If you don’t, coverage for a lawsuit for breaching it could be denied.
It is prudent to remember that insurance companies, whether they are insuring home inspectors or homeowners, make their money by collecting premiums … not by paying claims. An insurance policy is a contract which BOTH parties must comply with and words really do matter. Read them carefully and compare them to both your needs and your present business model.
There are many insurance companies that offer the lowest premium because they have the least intent to pay out on a claim. “I really don’t think I need to be insured but my state requires that I be insured” is the reason to buy the cheapest policy. “I wish to protect my personal assets from forfeiture, or I don’t have the cash to pay for expensive errors and omissions out of pocket, or both” is the reason to seek the best coverage.
Bottom line … there are many more important matters to explore with an insurance policy than simply the cost of the premium.