Tennessee Realtor State Practice Exam

What type of insurance may protect real estate agents against mistakes made during transactions?

1. General liability insurance

2. Errors and omissions insurance

3. Property insurance

4. Business interruption insurance

The correct answer is: Errors and omissions insurance

Errors and omissions insurance, often referred to as E&O insurance, is specifically designed to protect professionals, including real estate agents, from claims arising from mistakes or negligence in their work. This type of insurance covers legal costs and settlements when a client claims that the agent made an error in the course of their duties, such as failing to disclose important property information or providing incorrect advice that results in a financial loss for the client. Other types of insurance such as general liability insurance primarily cover injuries or damages that occur on a business's premises and do not specifically address errors in professional services. Property insurance protects the physical assets of a business, and business interruption insurance provides coverage for loss of income due to a business being unable to operate. While these insurances have their own important roles in the world of real estate, they do not offer the same level of protection against claims related to professional errors as errors and omissions insurance does.