Why carry home inspector insurance? You might have had this question for yourself. Or you might be the type of inspector who puts off getting insurance until after you’ve had a negative experience, like Tony Escamilla of Villa Home Inspections in California.
Earlier in his career, Escamilla felt that insurance was optional for experienced inspectors like himself. His typical mindset was, “As long as I do a thorough job, I don’t really need insurance.” This worked for a few years, but as he began growing his business and hiring inspectors to work for him, things changed. There were more inspections, more clients, and more chances for a complaint to blow out of proportion.
“I found the need to get insurance, just to cover ourselves,” he said.
However, before he was able to get errors and omissions (E&O) and general liability coverage in place, his fear came true.
“My inspector missed something, and it had the potential to be a very ugly thing,” Escamilla said.
After going back and forth with the client, they were more understanding than he’d expected. Regardless, it cost Escamilla and his company $7,500 to resolve the issue. Reflecting on the incident and how lucky he had been that it did not end differently, Escamilla said:
“Had I had the insurance, I wouldn’t have had that kind of problem.”
To carry, or not to carry insurance.
For you, Escamilla’s experience might feel too close to home. After all, some home inspectors—maybe even you—put off carrying home inspection insurance until it is too late. But $7,500 out of pocket is a relatively inexpensive outcome. In an industry where more than half of home inspectors face at least one claim during their careers, Escamilla was fortunate to stay out of court and keep his settlement (and attorney’s fees) out of the double digits.
As much as we, a home inspection insurance provider, would love to preach about how much you need insurance, your concerns deserve to be heard. So, we went and asked inspectors for common reasons why they might not carry insurance. And then we asked some more inspectors how THEY’D address those concerns. (We’ll throw a bit of our two cents in there, too.)
So, let’s check out four reasons not to carry home inspection insurance (and many reasons why you should).
“Insurance is too expensive!”
You might be new to the inspection industry, or maybe you’ve been inspecting longer than you’d like to admit. Regardless, you’ve probably heard some inspectors complain about the cost of insurance. For a new inspector, insurance can feel like a bucket list item for when you are well-established and have a constant stream of referrals. Between startup costs and marketing costs, your wallet might be feeling too thin to buy anything that does not seem “absolutely necessary,” like insurance. If you are worried about becoming established in the first place, getting insurance may not seem like a priority.
Many long-running inspectors also struggle to include insurance in their business plan, and they may believe that it is an “optional” expense that simply does not fit into their budget. Cautionary tales and “what if” scenarios won’t effectively convince you that insurance is a small price to pay if your budget does not have any wiggle room to begin with.
Actually, not carrying insurance can be WAY more expensive.
Buying E&O and general liability coverage may seem like a lot, but, when you compare it to the cost of a claim, it’s not. Although we try to resolve complaints at no cost to our inspectors (help us by reporting your claims early!), some claims go to court. These will cost thousands of dollars to defend and potentially thousands of dollars to settle with your client. Even if your case does not appear before a judge, you may have to settle a claim out of court. Settling outside of court will be cheaper for you in the long run, but you can often expect to pay more than your original inspection fee to cover the damage.
For claims where you damaged property during an inspection (general liability claims), it can be expensive to cover the cost of the damage. If you leave water running and it destroys the floor, you will need to cover the floor replacement. Or if you step wrong in the attic and add a hole to the ceiling, you will need to pay for that (as well as any healthcare expenses you have).
“In the grand scheme of things, insurance is not that expensive. What is expensive is if you miss something on a half-million-dollar property and it comes back to bite you. That’s when things get expensive,” said Shaun Pizani of Louisiana Inspection Firm.
New inspectors are particularly at risk. If they wait until business picks up before they add insurance to their expense lists, they’ll lack insurance protection for those early inspections. And it’s those first inspections that might have higher claims outcomes due to lack of experience.
Charging enough to mitigate risk is a good business practice.
See the value of mitigating risk but think insurance premiums are too expensive?
If you feel that your budget cannot handle insurance premiums, you may be undervaluing your work by not charging enough for your inspections.
For Calvin Bolt of Calvin Bolt Inspections & Testing in Indiana, affording insurance is a simple matter of sustainable rates.
“If you can’t afford insurance, well you’re soon going to be out of business anyway. Because if you think it’s too expensive, then you’re not charging enough to cover the cost of the insurance,” Bolt said.
Value yourself and your inspections enough to charge a fee that will protect you and your business. Learn more about pricing your inspections here.
“I don’t need insurance. I’m top-notch!”
As a home inspector, you’ve spent serious time developing your skills. Maybe you went to classes, passed the National Home Inspector Exam (NHIE), shadowed experienced inspectors, and are an active member of your association. Or perhaps you help other inspectors through shadowing, podcasting, or teaching a course. Because of your training and experience, you are confident in the service you provide your clients. You might feel like your years of complaints and upset clients are behind you. But bad things happen to good inspectors, too.
Hard work and professionalism are a solid foundation for protecting your future in this industry, but false assurance can leave you vulnerable. Claims and lawsuits still happen to hyper-competent inspectors, too. (Remember those stats earlier? More than half of all inspectors will have at least one claim during their career. It can happen to you.)
But how? If you perform a flawless inspection, how can a client come back and sue you?
Turns out, the customer isn’t always right.
If you look at our infographic of the Top 10 Reasons Clients File Claims Against Home Inspectors, you’ll notice the first eight reasons originate from unrealistic expectations of what is included or excluded in a standard home inspection. While there are certainly some things you can do to clearly communicate expectations, such as having a clearly written inspection agreement and a thorough inspection report, some clients are just adamant about pointing the finger at you.
“Even the best home inspector can have the worst clients,” said Derik Pomaville, an instructor from HI-TEC Home Inspection Training in Washington. “It’s good business practice for any service-oriented business to have errors and omissions insurance.”
And even the greats make mistakes.
Even when you inspect your best, you can still make mistakes or have an accident. (After all, the last two common reasons for claims in that list mentioned earlier are bodily injury and property damage claims. Accidents!) Thankfully, insurance can protect you when you’re at fault, too. Whether you miss one of the most common areas for mistakes—such as not identifying a defective roof—or you have an accident like dropping a ladder on a homeowner’s car, you will want someone to have your back.
Many inspectors, like Yaakov Fisgus of Inspect It Rite in New Jersey, work alone or own their businesses. They often feel the pressure of protecting their livelihood and their family’s well-being. That’s why so many of those inspectors choose to carry insurance so that simple mistakes don’t have the potential to bankrupt their businesses.
“I want to sleep at night knowing that if, God forbid, I somehow, some way made a mistake, I’m not going to lose everything,” Fisgus said. “At the end of the day, we are all human. One day, we’re not feeling well, we have a cold, or we get distracted by something. Things happen.”
You are not more professional or knowledgeable for assuming you’ll never make a mistake. All of us do, so it’s a matter of whether or not you’ll get caught. Carrying insurance can save you from that stress and vulnerability.
“Insurance puts a target on your back!”
Some inspectors have had clients call them up after their inspection and request their insurance information. You might suspect that your clients see you as a cash cow for fixing up their home, so long as they can prove you missed a defect. You’d even be supported in this suspicion by classic examples in other industries of people hurting themselves at a venue or running into traffic in order to make some insurance money. What is stopping your clients from trying to get a quick buck out of you? This has led some inspectors to wonder: “Does carrying home inspector insurance make me a target?”
Your insurance information is private—unless you share it.
While we covered the answer to this question in an earlier article, it is important to reiterate here: Insured inspectors are no more likely to receive claims than uninsured inspectors. We know this based on our state-specific inspector data. Inspectors in states that require insurance are not more likely to receive claims than inspectors in unregulated states.
“When you don’t have insurance, people that want their money or something fixed because you missed something are going to come after you one way or another. Then you’re putting your property and your family in jeopardy,” said Kenneth Rodriguez of Loyalty Home Inspections in Delaware.
Furthermore, no one knows you have insurance unless you say so. Potential claimants don’t know whether you have insurance unless you tell them voluntarily or until after they file a lawsuit and discovery begins. So, as long as you’re not advertising your insurance information on your website or offering it to potential clients and real estate agents, your clients don’t have a way to target you specifically because you have insurance.
And clients and lawyers want easy money—which isn’t always insurance money.
People assume that insurance companies may easily choose to settle at the cost of their clients. And, in some cases, that’s true. But here at InspectorPro, our thorough and experienced claims handling procedures make sure your claims resolve in your best interest.
When clients and their lawyers sue, they think that is a way to get easy money. But easy money and insurance money aren’t the same thing. Because our claims team only handle claims in the inspection industry, they understand the nuances, the regulations, and the standards of practice (SOPs) Our claims team’s knowledge of the inspection field makes them able to handle complaints and claims in your best interest. We settle when it’s best for our clients—not when it’s best for their claimants.
“I can handle my complaints better myself!”
You wouldn’t have started your inspection business if you weren’t confident in your ability to work with clients. Even if you do get a complaint, you might justify not carrying insurance in a few ways: You are good with people. You have a solid inspection agreement that is the “perfect shield.” Perhaps you have a warranty on your inspections. Or maybe you have an emergency savings fund and a sister who is a lawyer. Whatever the reason, you can probably figure out any claim that comes your way, right?
You don’t know inspection claims until you’ve dealt with A LOT of them.
Inspecting homes and resolving claims are two very different things. While both require knowledge about the industry, claims resolution requires legal know-how, too. And even if you’ve been able to handle a complaint over the phone once, that doesn’t mean you’ll be able to respond to a lawsuit.
That’s where having an experienced claims team comes into play. Responding to an attorney’s letter, enforcing the provisions in your inspection agreement, and defending your innocence are skills an experienced claims team can offer you. A home inspector insurance claims team will have necessary foundational knowledge that allows them to defend you better than a lawyer who will have to play catch up. Your claims team will be specialized and familiar with the court precedence and laws that affect your case. They can close claims faster and you will end up with a better outcome.
“We recommend that a licensed electrician repair electrical issues for the safety of our buyer. If we turn around and don’t use a professional in our own corner for something like [claims, we’re not taking our own advice],” said Joe Ballard of 406 Property Inspections in Montana.
An inspection agreement also needs a defense.
Getting help from a professional claims team not only helps you defend yourself, but it also helps you defend your pre-inspection agreement. Having a good agreement is only the first part of winning a lawsuit made against you. Agreements have been thrown out by judges in the past when they have had problematic provisions. And even responding to a lawsuit and enforcing the provisions in your agreement costs substantial money. You need to be confident in your agreement, and you need to be even more confident in your ability to defend it. That is why InspectorPro’s claims team has created state-specific pre-inspection agreements that maximize your protection.
Give yourself the best protection with InspectorPro.
You, your family, and your inspection business are all vitally important, and you deserve the best protection you can have. That protection comes with home inspection insurance.
Our goal is to be an insurer you can trust to keep you safe. Give us a shot. Here at InspectorPro, we strive to offer solutions that meet home inspectors’ specific needs. We live and breathe the home inspection industry.
Today, InspectorPro Insurance is the leading home inspection insurance provider in the nation. With a reputation built on superior claims handling and quality customer service, we give clients peace of mind. Our risk management tools work to change the litigious culture plaguing home inspection businesses. We do this by helping inspectors educate their clients and avoid claims. Our errors and omissions and general liability insurance policies are built to serve your unique business needs. Insuring with anyone else simply isn’t worth the risk.
Don’t believe us? Take it from Escamilla, who’s now a client of ours. Here’s what he had to say about reporting a recent complaint:
“I got on the phone with this really nice gentleman. He walked me through the whole process of pre-claims and gave me advice for what to do. I had it resolved within 24 hours,” Escamilla said. “That right there was worth my entire premium for me because it was instant, and the problem was resolved really quickly. Everybody was okay. [My client was] okay, and I was okay.”
Apply for a quote for our insurance program here.