Amount of E&O coverage needed?

[Trenton]

I just became a Certified Residential Appraiser and am ramping up to start my own practice. I have been working for other appraisers/appraisal companies the past several years but am trying to strike out on my own.

How much E&O insurance do I need? It seems the vast majority of lenders require it (at least the ones I've been seeing my prior employers do work for). Is there a standard or customary amount?

Thanks

 

[Tim The Enchanter]

I think usually $1Mil / $500k.
You can go higher if you want.

 

[Michigan CG]

If I were a residential appraiser (I do residential) I would carry $1,000,000 just to be safe for high-end properties. I live in an area where you can buy a house on a golf course for less than $400,000. In certain parts of CA and NY my house would be worth over $1,000,000 and I think I might carry more in those areas.

I have $3M/$1M because of my commercial license although I haven't appraised anything (commercial or residential) over $1,000,000 in the last three years.

 

[gregb]

Since you are just ramping up your business, take the minimum E&O to start. If you get clients who request more, you can always raise it beyond $300,000. What is the range of property values in your Texas market area?

 

[Trenton]

Thank you all for the input.

I'm actually in Ohio now, and while there are some million+ dollar houses, it's not very common. So what does the second number mean? Like if the coverage is 1 million/500 thousand, what does each number represent? I'm looking at OREP website trying to figure it out.

 

[jay trotta]

Thank you all for the input.

I'm actually in Ohio now, and while there are some million+ dollar houses, it's not very common. So what does the second number mean? Like if the coverage is 1 million/500 thousand, what does each number represent? I'm looking at OREP website trying to figure it out.

Make a phone call to them and have them explain Policy Coverage; ask them what they have typically paid out in cases; unless you are sloppy, you should be OK. Learning what you need to run your own business is an on going process, research the section here on Running an Appraisal business.
Good Luck

 

[CANative]

Most AMC's want $1m. It only costs a few dollars more to get $1m vs. $500k.

Probably don't need it if you're not working with lenders. I've never needed it but carried it for 17 years at about $700/year. Nearly $12,000.

 

[bnmappraisal]

First off, Congrats on getting your CR

I use LIA and pay around $1,200/yr for $1m/$1m coverage. But 7 figure properties are not uncommon in my market (avg 3% of my reports per year)
As CAN points out above, the $1m vs $500k is a minimal cost difference per year.

Some AMCs and Lenders require $1m, but you're probably fine with the $300k or $500k. Check with your clients

 

[CANative]

A lot of my AMC's want the $1M, but this time I stubbornly didn't let my E&O provider upsell me to the million and I went with $500k. No complaints and no dent in my assignment flow.

I use ALIA which is some kind of an E&O Broker. Less than $650 for $500k, About $670 for the Million. I typically put about 25% down and make payments for $50 per month. There is a small finance charge and a little bit of interest. Works out to $700±

 

[Joe Flacco]

I got the $2M/$2M from LIA and that cost $1168 with $5k deductable. The $1M/$1M was $756 with $1k deductable.

In reality it's unlikely to ever have to file a claim but the difference in premium is small enough to just cover worst case scenario.