Real Estate Council of Alberta Fundamentals Practice Exam

What is the typical coverage limit of Errors and Omissions Insurance?

1. Unlimited coverage

2. Basic coverage for property damage

3. Coverage equivalent to professional malpractice

4. Liability for personal injury claims only

The correct answer is: Coverage equivalent to professional malpractice

Errors and Omissions Insurance (E&O Insurance) is specifically designed to protect professionals from claims of negligence or inadequate work. The typical coverage limit for E&O Insurance is generally equivalent to what would be seen in other professional liability insurance policies, such as those covering malpractice in various professions. This means that it usually provides a substantial limit that reflects the potential financial risk that could arise from errors or omissions in the services provided by the insured professional. In the context of real estate, this type of insurance is crucial as it covers the financial damages clients may claim due to mistakes made by a real estate professional, such as misrepresentation or failure to disclose important information. While the specifics can vary by policy and provider, the intent is consistent across the field, emphasizing the importance of having adequate protection in a professional setting. The other options focus on different types of coverage that do not accurately reflect the nature or purpose of E&O Insurance, further illustrating why the typical limit is comparable to professional malpractice insurance rather than being unlimited, specifically for property damage, or solely for personal injury claims.