Why Do Real Estate Brokers Need Insurance?

August 3, 2018

As a real estate broker, your number one priority is honestly painting yourself, your services and your skills to both the seller and the buyer. Whether it’s a buyer’s or seller’s market, there is always plenty of opportunity to do this. However, with plentiful work and continuous opportunities to market yourself and make some business work comes the potential of pitfall after pitfall.

The same buyers and sellers who can provide you business can also bring suits against you based on a number of legal statutes, both common and statutory. Real estate brokers should be mindful of legal issues that can affect not only your work, but your reputation, and in effect your long-term career plans. Brokers should not only stay up to date with the laws that hover over daily real estate moves, but take advantage of protection to fight against possible fallout, such as real estate broker insurance.

To help avoid some potential legal pitfalls, here are some issues to keep in mind:

Misrepresentation Issues

A big reason why many real estate brokers find themselves in the middle of legal issues has to do with misrepresentation. As part of their jobs and daily goals, real estate brokers do their best to make the properties they represent stand out among the crowd. This kind of pressure may open the door to exaggerating on some of the features and the condition of the property.

It may seem like a simple thing to walk back, but buyers or sellers can actually take you to court for this. Always be truthful in your claims and keep transparency a priority when representing a property.

Data Security

When collecting client information, it’s imperative to know how important it is to keep their sensitive information as safe as possible. With a big shift in focus on data hygiene and cyber attacks in every industry, real estate brokers should understand the threat hackers can bring. Protect your clients’ information by installing security software. If you prefer to use paper, or use it as an additional source, ensure that all sensitive information is stored somewhere safe.


This issue is related to a cause of action where a client alleges the failure of a real estate broker in terms of exercising due care toward them. Clients can claim that brokers should have known specific information, but did not and in turn did not take appropriate action.

Breach of Contract

If a client feels that their broker did not perform in accordance with the terms on their contract, they could go ahead and pursue legal action. And they would have cause as well. One main reason for breach of contract comes to not complying with the time frame stated in the agreed upon contract.

Breach of contract usually includes other claims like fraud, breach of duty and negligence.

Real estate brokers need to make sure that they ensure that all the information is fair and accurate in order to avoid these issues and possibly face legal setbacks.

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 coverage 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. In 2017, ALIA was purchased by Riverton Insurance Agency Corp.