What Types of Insurance Does a Home Inspection Business Need?

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A home inspection business is a flexible industry where you can pick your schedule and see a wide variety of properties. The inspector’s job is never the same from day to day. Each house will be different and memorable—who knows what you may find in a crawlspace?

Real estate is an ever-growing market with high demand, making an inspector’s schedule full of clients. A busy schedule and a hot market mean the possibility of more risk associated with the work as there is only so much time to get the work done. Therefore, a home inspector insurance policy is essential to protect the business from financial loss.

Related: How to start a home inspection business

What Are Some Risks for A Home Inspection Business?

Some risks that an inspector may face include:

  • Omitting vital information to a buyer
  • Lost or damaged equipment
  • Automobile accidents
  • Injury to employees on the job

This list is a brief overview of potential risks and liabilities. Without coverage, the business would be financially responsible for losses. However, a comprehensive insurance package will provide coverage for the company when a claim or lawsuit occurs.

Omitting Vital Information

During the work, an inspector looks for possible hazards, damage, and wear on a property. The inspector then discloses this information to a new buyer, who will use this information to decide or leverage a negotiation on the property. If the inspector omits or falsely represents an issue with the property, this fault could result in a claim against the inspection business.

Lost or Damaged Equipment

Inspectors travel from property to property, providing inspection services. The job requires equipment such as cameras, lights, laptops, radon monitors, tablets, and ladders. The business’s equipment needs insurance coverage if it becomes lost, damaged, or stolen.

Automobile Accidents

Since the work takes place at different locations, the inspection business needs vehicles to transport the employees between jobs. As a result, car accidents can occur, leading to insurance claims for injuries, vehicle damage, and liability to other parties.

Injury to Employees

Some home inspection businesses have employees. Insurance for employee injuries covers the workers on the job. An inspector checks all areas of the property, meaning they are up on ladders and roofs, in tight crawl spaces, and contact with household pets. Those hazards may lead to claims from falls, trips, cuts, bites, and scrapes.


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What Types of Insurance Should a Home Inspection Business Consider?

Accidents are neither planned nor wholly prevented. However, insurance works as a preventative, financial cushion. Insurance policies give the business owner peace of mind when accidents happen by offering financial coverage for claims.

Insurance policies that the business should consider are:

  • General liability
  • ProfessionaWorkers’ity
  • Inland marine
  • Commercial auto
  • Workers’ compensation

General Liability Insurance

Since home inspectors need to be physically present on the client’s property to perform an inspection, damage to the property or injuring a customer during the cause of work may happen.

General Liability insurance, also referred to as commercial general liability (CGL), provides financial protection against third-party claims of bodily injury or damage while you or an employee is inspecting a property. A general liability policy would cover medical costs and legal fees should the property owner sues.

General liability coverage can also provide advertising injury protection, which can cover damages from slander, libel, copyright infringement, and more

Professional Liability Insurance

Home inspectors service both residential and commercial properties. The buyers rely on the inspector’s report to help determine the value and condition of the property. Based on the information, the buyer can negotiate the purchasing price and know what risks or work they are taking on by purchasing the property.

When an inspector (which includes the owner, employees, or even independent contractors hired by the business) omits findings or downplays the wear and tear, the buyer may sue claims of negligence. For example, suppose the inspector finds foundation damage but fails to mention it. In that case, the buyer may sue the inspector for not providing them with this valuable information on the home’s condition.

Professional liability, (also referred to as errors and omissions insurance or E&O insurance), offers coverage for mishaps in the professional services. As such, the policy will help cover the cost of lawsuits or financial losses because of omitted or incorrect information.

The insurance company will pay up to the policy limit for legal defense fees and damage settlements to the client. Typically, a deductible applies, and a higher deductible means a lower premium; however, be sure the deductible is reasonable for your budget.

Inland Marine Insurance

An inland marine policy agrees to cover lost and damaged equipment that moves between locations. For example, a home inspector uses gear (ladders, bodysuits, radon detector, lights, etc.), cameras, laptops, and tablets. These items travel with the inspector between locations. An equipment floater—a type of inland marine coverage—insures the equipment wherever it goes.

This policy offers payment for claims due to:

  • Fire
  • Theft
  • Vandalism
  • Breakage

An inland marine policy also covers important documents by reimbursing the value of lost paperwork and contracts.

Commercial Auto Insurance

Job sites vary for a home inspector; this means that the job involves a considerable amount of driving. Whether a sole proprietor or employees are going between jobs, coverage on the company’s vehicles is essential to protect the business. Work vehicles damaged in an accident lead to an interruption in the ability to work. And, without insurance, the company bears the cost of replacing or fixing the vehicle and acquiring a rental car.

Most personal auto policies don’t provide coverage for vehicles used commercially. Therefore, it is important to purchase a commercial auto policy. The commercial auto policy offers similar coverages to a personal auto policy, such as personal liability to third parties and physical damage to the company’s vehicles.

A commercial auto policy covers:

  • Liability—pays for bodily injury and property damage to a third party in an at-fault accident.
  • Collision damage—pays for damage to the company vehicle in an at-fault accident.
  • Comprehensive damage—covers damage to company vehicles resulting from theft, vandalism, wind and hail.
  • Uninsured motorist liability and damage – provides coverage to the company if an uninsured driver causes injury or damage.
  • Rental reimbursement—offers coverage for the cost of a rental vehicle while a company vehicle is unavailable due to a claim.

The commercial auto policy covers employee drivers and various vehicle types, such as trucks, cars, box trucks, and trailers.

Workers’ Compensation Insurance

A home inspection business with employees should consider a workers’ compensation policy. This policy provides coverage for injuries and illnesses while working. For example, falls from a ladder, roof, or stairs can result in significant injury to an employee. Additionally, an employee may become ill from inhaling dust, mold, or other harmful particles while in attics and crawl spaces.

However, because of on-the-job injuries, a workers’ compensation policy pays for:

  • The employee’s medical expenses
  • Disability
  • Ongoing rehabilitation costs
  • Lost income

Workers’ compensation is an excellent policy to protect the business from potential lawsuits resulting from injured employees.

How Much Does Home Inspector Insurance Cost?

A Business Owner Policy (BOP) differs in price to match the needs of each business. For example, sole proprietors without employees don’t need a workers’ compensation policy, and their liability risk is lower because fewer jobs are being completed on a given day since the owner is the one doing all of the inspections.

 

The best way to get an idea of premium costs for home inspection insurance is to get quotes from several business insurance agents or companies. Many companies offer bundled policies—such as a business owner’s policy—which can include multiple coverages under one policy, with one premium. Other times, when the policy isn’t bundled as one, the bundle can at least offer you a discounted price.

Two main variables that influence the annual premium are 1) the policy coverage limits and deductibles and 2) the amount of risk.

  1. The policy coverage limits and deductibles are the main influences on price. A policy with a high coverage limit will increase the cost of the policy. Further, a low deductible will raise the policy’s premium.
  2. The amount of risk is determined by how much work and money the company generates. A business that inspects five homes per week has less risk exposure than a multi-employee company that inspects 20 homes per week. Additionally, the company’s number of employees, vehicles, and equipment owned and used will influence the policy cost.

 

It is advisable to carefully review the policy limits and deductibles to ensure the amounts are enough for your small business needs. Paying for a policy that doesn’t provide enough coverage, or includes an unaffordable deductible, will be frustrating when a claim does arise. However, do not sacrifice having insurance for the sake of saving money. In the end, having some insurance is better than no insurance at all.

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