247SimpleTests
Real Estate · Brokerage Management

What is 'errors and omissions' (E&O) insurance and why is it important for real estate brokers?

Correct answer

Professional liability insurance covering claims arising from errors, mistakes, or omissions in the broker's professional services — protects the broker and agents from financial loss when sued for negligent performance

  1. A Health insurance for real estate professionals
  2. B Professional liability insurance covering claims arising from errors, mistakes, or omissions in the broker's professional services — protects the broker and agents from financial loss when sued for negligent performance
  3. C Auto insurance for the broker's vehicle
  4. D A bond required by most states

Why this is the answer

ERRORS AND OMISSIONS (E&O) INSURANCE is professional liability insurance specific to real estate practitioners. What it covers: NEGLIGENCE claims — failing to disclose a known defect; failing to verify information the agent represented as true; drafting contracts incorrectly; missing deadlines; misrepresenting property features; ERRORS — honest mistakes in the course of professional services; OMISSIONS — failing to do something a reasonable professional should have done. What it does NOT cover: INTENTIONAL acts (fraud, deliberate misrepresentation); criminal acts; claims arising from licensed activities conducted while the agent's licence was expired. Requirement: some states require E&O as a condition of licensure; most don't — but most brokers require their agents to carry it or provide it through the brokerage. E&O premiums: $300-$1,500/year for individual agents; $2,000-$10,000+/year for brokerages depending on volume.
Source: Real Estate Broker Exam, E&O Insurance

Practice more questions

This question is from our Real Estate License Practice Tests practice test. Take the full practice test to test your knowledge across all Brokerage Management and other topics.

Take the Broker (National) practice test →

New to this exam? Our Real Estate exam guide explains the format, scoring, and how to prepare.

Related questions

Brokerage Management

What is the primary difference between a real estate salesperson and a broker?

 Brokerage Management

Which of the following is a key responsibility of a managing broker?

 Brokerage Management

What is the difference between an 'independent contractor' and an 'employee' in real estate brokerage?

 Brokerage Management

What is the broker's duty regarding advertising?

State-specific guides

Need information for your state? Our state guides cover local requirements, fees, and what to expect on exam day.

California Texas Florida New York Pennsylvania Illinois Ohio Georgia

Recommended study materials

Study guide

Real Estate License Exam Prep 3rd Ed. (Performance Programs)

National and state portion prep, contracts, agency law, fair housing, and math — the industry standard.

Check Price → Study guide

Modern Real Estate Practice 21st Ed. (Dearborn)

The most widely used real estate principles textbook: principles, law, practice, and math in one volume.

Check Price → Study guide

Real Estate Math Express (Dearborn)

Commission calculations, financing, proration, area, and all exam math explained step by step.

Check Price →

As an Amazon Associate, CJ Affiliate, and AWIN publisher we earn from qualifying purchases. Links above are affiliate links. Full disclosure →