Errors and Omissions Insurance for Home Inspectors

Prospective homeowners count on home inspectors to provide valuable information about the state of a house they have agreed to purchase. Home inspections are typically one of the final “checks” on the home itself before a purchase is completed.

Home inspectors are hired to provide a professional analysis of a home. They serve as the “trained eyes,” pointing out to homeowners any current or potential future issues they may have with the home.

Generally speaking, the items identified in a home inspection report will either need to be replaced and/or repaired right away, or could be just something to keep an eye on down the line.

While a home inspector possesses certain expertise in the health of a home and its main “systems,” they don’t always catch everything. In these cases, homeowners may try to sue a home inspector if they believe the inspector didn’t point out a major issue with the home that they only discovered after the purchase.

To help protect themselves against these lawsuits, home inspectors can purchase professional liability insurance that is known as errors and omissions (or E&O) insurance. Here are some more details about it.

Why Would a Homeowner Sue a Home Inspector?

As many homeowners are not experts in construction and home maintenance, they rely on home inspectors to point out to them potential issues of a home they want to purchase. These inspections are typically done after a purchase agreement is made between a buyer and seller, but before the purchase closing.

Homeowners use the inspection reports to determine whether they want to move forward with the home purchase, and whether they might ask the seller for concessions before completing the purchase. These reports are also used as future “To Do” lists for the items that don’t need to be addressed immediately.

If a major issue with a home occurs after the purchase has been completed, the homeowner may think that the home inspector should have pointed it out to them. This will typically happen with the home’s major systems.

For instance, if a roof begins to leak in a major way not long after homeowners completed the purchase, they will most likely consult their home inspection report. If that report didn’t outline any areas of concern, they may sue the home inspector for missing potential underlying issues that they could have known about before the purchase was completed.

The lawsuit is filed because the homeowner will have no recourse from the seller at this point, since the purchase was already completed. Plus, the damage caused by such a scenario could be costly — even if their homeowners insurance provides coverage.

What Does E&O Insurance Cover?

Just like any professional, even the best home inspectors can make a mistake at times. They may have missed a small crack in the roof, for instance, that ends up resulting in a major flood in the home during a big storm.

By having professional liability insurance, a home inspector can protect themselves from these errors and omissions, if that’s proven to be the reason that the damage occurred.

E&O insurance will cover the home inspector and all of their employees while they’re performing the duties of their job. Generally speaking, errors and omissions insurance will cover home inspectors for …

Missing issues with the home’s HVAC: Homeowners could seek to have your business cover damage caused by a faulty heating system and any resulting repairs.
Ignoring a system: Homeowners may seek compensation for damage to a roof if, for instance, one of your employees forgot to analyze the roof at all.
Downplaying an issue: Homeowners might sue your business if you stated that a problem such as a crack in the foundation was nothing to worry about, if they find later that the home is sinking.

If you don’t have E&O insurance, you’d be forced to pay for these claims out of your own pocket, since your other insurance policies likely wouldn’t provide any coverage.

Other Types of Insurance for Home Inspectors

Errors and omissions insurance is a very important policy for home inspectors to have, but it’s not the only policy they should carry. Some other policies they should carry include …

General liability: This provides coverage for a wide selection of issues such as bodily injury, property damage, reputational harm and more. All businesses, regardless of their industry, should carry this type of insurance.
Auto: Since home inspectors and their employees may dry company vehicles to get to and from jobs, it’s important to have commercial auto insurance. This provides coverage in case anyone is involved in an accident that causes damage and/or bodily injury.
Workers’ compensation: Should you or an employee get hurt on the job, workers’ compensation insurance will provide payment for medical bills and lost wages during recovery.
Cyber: With so much information being stored online today, cyber insurance is becoming all the more important. This insurance protects home inspectors in case their systems are breached and their data — or that of their customers — is compromised.

Work with Signature Insurance, a Company You Can Trust

Errors and omissions insurance is one of the most important coverages that a home inspector can have. Without it, the company’s other insurance policies typically won’t provide any protection in the case that an inspector and/or their employees make a mistake or oversight that results in major damage at a customer’s home.

This would open the home inspector up to a major lawsuit that could prove to be extremely costly. Without E&O insurance, the home inspection company could be liable to paying the entirety of the claim out of their own pocket.

If you’re searching for errors and omissions insurance for your home inspection company, work with Signature Insurance. You can trust our company to not only provide you with the best E&O insurance policy, but to also guide you through the process of finding the best overall coverages for your business.