Do Real Estate Agents and Brokers Need Workers’ Compensation Insurance?

September 6, 2019

Real estate brokers and agents operate on their own accord at times, heading out to properties and working with potential clients out of the office. But even though they spend a good deal of their day showing houses and working offsite, real estate brokers and agents, in fact, do need workers’ compensation coverage.

Brokers may ignore workers’ compensation coverage requirements for their agents, or agents themselves may not be aware that they need it. This may happen because of miscommunication around what’s included in an independent contractor (IC) agreement. Regardless, under labor laws, licensees entering into IC agreements are known as employees, which means that they need coverage.

Let’s look more closely at the why behind workers’ compensation for real estate professionals.

Brokers’ Employees

A broker who employs real estate agents needs to work with the right paperwork, classification, and insurance coverage. A broker’s employees include their licensed sales agents, other brokers working under their license, and their licenses and unlicensed admin staff.

If a broker sidesteps workers’ comp coverage and is caught, they can face a stop order from labor organizations in their state, which prevents them from conducting business until proof of insurance can be shown, civil penalties up to $100,000, and reimbursement claims from current and former agents for premiums they paid for their own workers’ compensation insurance.

Real estate owners who do not oblige workers’ comp standards can hurt the entire real estate industry. Getting caught can not only end up costing a real estate broker or agent money in loss of work and fees associated with the legality of it all, it can also end their operation as a whole. Purchasing the right kind of workers’ compensation coverage needs to be a priority for business owners and agents who work in the industry.

A Quick Note on Exclusions Under the Law

There are arrangements that exist which exclude workers’ compensation insurance requirements for brokers and corporate officers and directors. The broker of a sole proprietorship is not required to have workers’ compensation coverage on their own.

When a broker is the sole owner of a company, workers’ compensation insurance for them is not compulsory. In this case, only immediate family members who aren’t the sole owners of the company in question are excluded from workers’ comp coverage.

About Associations Liability Insurance Agency (ALIA)

The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive liability insurance they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. For more information about our products and services, contact us today at (800) 882-4410.