When it comes to investing in E&O insurance, there's one thing that's undeniable: price matters. If you can purchase a policy for less, why would you pay more? You've got a business to run after all.
But there's a catch with those cheap-o policies that their sales reps won't share with you. They are able to offer inexpensive prices because the policies are often flimsy and won't hold up when you really need them.
Now which policy sounds like a better deal to you: The one that is cheap to buy, but doesn't cover you when you really need it? Or the policy that costs a little more up front but saves your business major money (and headaches) in the long run?
You're a business owner. You already know the answer to this one. Here are three reasons why the quality of your E&O insurance policy is more important than price:
When comparing policies for you, cheap providers won’t compare apples to apples.
Often you’ll see inexpensive policies that seem like a good deal on the surface, but when you look more closely you’ll see that there are slight differences in the policy that add up to major dings in your bank account if you’re not careful. Are the exclusions the same? Is one an Admitted carrier and the other Non-Admitted? Are you paying surplus lines fees and other taxes? Are there endorsements or additional coverage written into the policy??
Like surprises? Cheap policy providers are FULL of them.
What happens when the carrier denies coverage for something for which you thought you were covered? What do you do when you were not notified that exclusions were put in place after you obtained coverage? Or worse, the claim is filed and shortly thereafter your policy is cancelled? These are the kind of surprises that you can’t afford.
Does the deductible matter? Absolutely.
Lower rates can be offered with higher deductibles, but consider the overall cost. If cheap-o E&O costs $1,000 and has a $2,500 deductible compared to the Cadillac E&O insurance that costs $1,300 and has a $1,000 deductible, do the math. A single claim in 5 years means the real cost is the same.
Want to talk with an actual human being that can answer your question quickly and efficiently? Not a chance!
When you call cheap providers, you’ll hear something like this: “All calls are answered in the order in which they are received. You are currently caller number 592. Estimated wait time is 2 hours and 15 minutes.”
Sure, you’ll get to talk with a real person when you’re signing up for your policy initially. However, if you ever have a question or a challenge with your policy, you’ll get to talk with their friendly robot answering service and spend time choosing from a menu of options that don’t answer your questions or allow you the ability to obtain answers in a timely fashion.
That’s just how they'll react to your questions -- God forbid you actually have a claim that you need help with! This is how cheap providers cut costs – they cut customer service.
The quality of your E&O Policy is more important than the price. Understanding what you receive in exchange for your hard-earned money will help you find a carrier that will have your back, not turn its back.
FREA, Foundation of Real Estate Associates, is a membership organization – and membership certainly has its benefits. Unlike a broker, FREA membership offers quality and benefits not offered by other E&O providers. FREA has been the leader in the industry, providing E&O, education, and membership benefits to appraisers and home inspectors with unparalleled quality.
Our Members choose FREA over the other guys because we maintain a unique program. The FREA service continues by giving members access to general counsel and an experienced nationwide panel of attorneys to help defend claims. We also offer member-only news alerts, exclusive pricing and discounts on benefits including Business services and Insurance benefits (learn more).
With the policy additions introduced in 2011, FREA was the first to include FDIC coverage for its insured members. We also offer Contingent Appraisal Management Company (AMC) coverage for appraisers and Personal Identity Coverage (PIC) for all members. Start comparing apples to apples. Don’t compare policies based on price alone.