Owning a home inspection business is hard work. There’s licensure. There’s marketing. There’s scheduling. Not to mention meeting with clients and hitting the jobsite on time, with a friendly smile on your face.
One important element to running a successful business is managing your risk. Your clients rely on you to alert them to potential flaws in the home they’re considering. Their investment and possibly their safety are on the line.
Since there is so much at stake in buying a home, home inspectors can be at risk for a lawsuit if something goes wrong. You’re an expert, but you’re also human and mistakes happen. If you made a mistake and your client purchases a house that has a major issue, you could be on the hook for damages.
That’s why choosing the right commercial insurance coverage is key. Business insurance will protect you from a devastating financial loss if sued. It can also prevent your business and personal finances from a major loss. Here are the most common insurance options for home inspectors.
General liability insurance
General liability insurance covers on the job accidents. Sometimes called “slip-and-fall” insurance, because it covers exactly that type of unexpected event.
General liability insurance typically covers the following:
Bodily Injury offers coverage If someone gets hurt while you’re doing your job. Example, your client trips over a tool and breaks their hand. They could sue you for medical costs related to the injury.
Property Damage covers damaged that occurs while conducting your inspection. Example, your ladder falls and dents your client’s car or it accidentally breaks a window. Your insurance would cover repairs or replacement of broken items.
Bodily injury and property damage are the most common general liability claims. Good insurance policies will also cover other issues, including:
Copyright Infringement, although unlikely to affect home inspectors, it does happen. It's possible you could be sued for using someone else’s ad slogan or business logo if a similarity exists.
Reputational Harm, although also unlikely, does happen. This protects you in the event you are sued for slander. Example, you run an ad about a competitor that hurt their business.
General liability coverage will pay for damages if you are found to be at fault in any of these situations. It will also cover the defense costs in court against both justified and false claims.
Errors and omissions insurance
Errors and omissions insurance protects you against claims that involve your professional work. It is more commonly referred to as Professional liability insurance. For home inspectors, this coverage is what protects you from a nightmare scenario. You missed an issue with the foundation, and now the home buyer is suing you for the cost to repair it.
E&O insurance protects you against claims that you were careless or negligent in your work. i.e., you missed something during your inspection. This insurance covers your professional work. rather than accidents that aren’t related to your skill or the scope of your practice. These policies cover legal costs and any settlements you must pay to make things right.
The importance of great E&O insurance can’t be overstated. Home inspectors often have to break bad news to a potential home buyer. This can put them in a difficult situation when an inspection reveals major problems. Unhappy home buyers look for someone to blame, that person is often the home inspector. Regardless if you are actually at fault for a problem, a lawsuit is time-consuming and costly. Your insurance will cover the legal fees. It also provides you significant peace of mind throughout the process.
If you have even one employee, you’ll need to purchase worker’s compensation insurance. This will cover them in the event of injury on the job. This coverage is mandated in nearly every state. Many jurisdictions allow you to exempt yourself as the business owner. This insurance covers the costs of medical bills when an employee gets sick or injured on the job. It can also cover lost wages from time of the job, disability coverage, and death benefits.
Commercial auto insurance
If you have a car or truck that you use solely for your business, you’ll need a commercial auto policy to cover it. It includes the following coverage:
Liability: Coverage for bodily injury and property damage caused by the insured vehicle.
Medical: Coverage for medical payments for the driver, regardless of who was at fault.
Uninsured Motorist provides coverage if you are hurt by a driver who is uninsured.
Comprehensive and Collision provides coverage for damage to your vehicle. Collison covers damage caused by an auto accident. Comprehensive covers damage cause by things other than collision. This would be things like a fallen tree limb, vandalism, fire and theft.
Business owner’s policy (BOP)
A business owner's policy is a policy designed to protect business owners from common losses. It’s an insurance package that usually includes three major types of business insurance. These policies typically cover the following:
General Liability: coverage for on the job accidents.
Commercial Property insurance provides coverage for the commercial space you own or rent. It also covers your business property. It’s important to read the fine print about what events are covered.
Business Interruption can reimburse you for lost income. If you had to stop working due to a catastrophe, coverage would kick in. Example, your office caught fire and you had to close for several weeks for building repairs. It could also provide income if you had to close for a few weeks.
A BOP often provides business owners a great deal. It bundles several types of insurance together into one package. Your needs as a home inspector may be different that the average small business owner. Make sure you review the fine print and make sure you’re getting everything you need.
Additional Insurance considerations for home inspectors
A business owner’s policy can provide good comprehensive coverage. As a home inspector, you have specific needs to consider that other business owners don’t. For example, inspectors conduct the majority of their work offsite. So it’s important to have off-premises coverage for your gear and other liabilities. As a home inspector, you should also have coverage for all the ancillary services you may provide:
Radon testing and inspections
Termite and wood-destroying organism inspections
Indoor air quality testing
Energy ratings and audits
Lead paint inspections
Pool and spa inspections
Mold and septic inspections
You'll want to make sure that your specialty equipment and any liability related to its usage is also covered. This would include:
When it comes to insurance for your business, let us at The Huttenlocher Group shop around for you. We'll get you the best rate and we'll explain the coverage and make sure you understand exactly what is covered.
Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Please check with your local Independent Insurance Agent for details.