When I listen to late night radio, I often hear commercials for a company that sells term life insurance. The company being advertised compares multiple insurance providers to find consumers the best rate. One of the main messages of the commercial is that each company rates “the risk” of insuring a person differently. This can create wide differences in prices for similar types of policies. Insurance companies tend to specialize in the type of coverage that they provide and the type of clients that they insure. This is true for companies that sell life insurance, as well as companies that sell insurance policies to business owners. In the areas which they specialize, insurance companies tend to offer the lowest rates.
Hunter Hoffmann is the Head of US Communications for Hiscox, an insurance company focused on small business. I had a chance to talk with him about the insurance needs of real estate brokers / agents and salon owners. These are two areas in which Hiscox specializes. The following are based on my notes and do represent Mr. Hoffmann’s exact words.
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The Institute For Legal Reform report 43% of small business owners have been threatened with a lawsuit or been sued! More than half of all business being sued have less than $1 million in revenues. However, even the threat of a lawsuit can impact small businesses and cost them time and legal fees.
What are the most important policies for real estate brokers and salon owners to have?
For both real estate brokers and salons it is important to have professional liability, also known as errors and omissions, and general liability. Getting insured is usually much cheaper than businesses expect. On average, customers of Hiscox pay around $550 per year for $1 million of both general liability and professional liability coverage.
What types of circumstances would professional liability insurance cover?
Professional liability insurance provides protection against legal claims arising from performing services or providing products. The types of claims that might come up will vary from one industry to another. In the real estate industry, we see many claims coming from buyers that had second thoughts after buying a home. After the fact, they believe that they paid too much or ended up in the wrong property. They can claim the agent provided them bad advice with regards to making an offer, or did not show them enough properties to make an informed decision. Regardless of the merit of these claims, if legal action is taken, it is costly to go to court. Professional liability insurance can take care of providing the legal defense, as well as resulting settlements or negative verdicts.
Do real estate agents get sued for discrimination?
Yes, they do. A client might feel that they weren’t shown certain neighborhoods, or specific homes or apartments because of their ethnicity, race, gender or sexual identity. This can result in a lawsuit. This type of suit would be covered by a professional liability policy for a real estate agent.
How about salon owners?
A salon owner or an employee might leave a chemical treatment in a client’s hair too long. As a result the client might lose hair and have some scalp damage. In this circumstance, the client might sue the salon owner or beauty practitioner for medical bills, psychological distress, and even loss wages if they feel that cannot go to work.
So far, we have discussed professional liability insurance. How is general liability insurance different?
The classic example is a person slips on banana peel on the sidewalk in front of one’s store and breaks their leg. The resulting legal claim would be covered by general liability insurance and not by professional liability insurance. Basically, if there is an injury or property damage that occurs at a company’s location or place of work, then general liability insurance would most likely provide coverage.
Can you give an example for a salon owner and real estate agent?
Sure. A hair stylist goes to people’s houses for appointments. The stylist accidently leaves the blow dryer on when they leave, the dryer overheats causing a fire. The damage from that fire would be covered by general liability. For a real estate agent, it might be a client tripping on steps and falling while showing off a property.
What can be the cost of the lawsuit?
Small companies that don’t have insurance protection and get sued, outside of a small claims court, generally don’t survive the experience. We estimate two out of three small businesses end up closing. While an adverse verdict can cause bankruptcy, just the legal cost of defending the company can be enough to shut the doors.
Hunter Hoffmann is Head of US Communications at Hiscox Small Business Insurance and is responsible for media relations, social media, internal communications and executive messaging. Hunter lives in New York City with his wife and two sons – Walker and Otis. In his spare time, he moonlights as Chief Marketing Officer for Junior’s Fresh, a fresh and healthy pre-school meal service provider and cafe in New York City founded by his wife, Michelle.
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