Professional Liability Insurance for Mortgage Brokers

Mortgage brokers provide a valuable and essential service for real estate buyers and owners. Whether purchasing or refinancing a property, clients depend on their mortgage brokers to help secure the services of a qualified lender and then perform the necessary tasks to close the transaction.

Unfortunately, things don't always go as planned when arranging financing for the purchase of real estate. A closing can fall through due to the improper or late filing of paperwork. Problems can also occur due to the failure to properly obtain an appraisal. Should these or other errors or omissions result in financial losses for a client (such as forfeiting a deposit), it may file claims for damages against their mortgage broker.

Fortunately, Professional Liability Insurance – also called Malpractice or Errors & Omissions (E&O) Insurance – is available for mortgage brokers of all shapes and sizes.

How Professional Liability Insurance Works
Professional Liability Insurance provides mortgage brokers protection in the event a claim is made against them by a client or third-party alleging damages due to the failure to perform professional services in a satisfactory manner. The PL Insurance policy typically covers, up to the policy limit, both the cost of defense and any monetary damages awarded to the claimant due to the broker not performing up to the industry's prevailing standard of care.

Professional Liability Insurance premiums are typically paid annually and cover a one-year term. The policies are written on a claims made and reported basis, so a claim must be made by the claimant and reported to the insurer within the policy year (or any extended reporting period) in order for coverage to be in effect.

Policies will typically cover work back to the earliest date of continuous PL insurance coverage. For example, if a mortgage broker has maintained continuous PL insurance since 2001, then his or her current policy will cover any new claims brought against any work performed since the policy inception date in 2001. If the PL policy is cancelled or not renewed and continuous coverage ceases, then the broker can lose coverage for all previous work unless prior acts coverage is secured on a new policy.

Typically, PL policies are written in increments of $1 million of aggregate limits, with deductibles available on a per-claim basis, usually starting at $1,000. Policies may exclude coverage for specific acts and services.

Don't Overlook This Important Coverage
Virtually every mortgage broker can benefit from Professional Liability Insurance. PL Insurance can provide the protection a broker needs to defend itself against claims of alleged negligence as well as the financial resources necessary to pay any settlement or judgment.