Real estate surety bonds

Each state has its own requirements for business licenses, including professional licenses for real estate agents, brokers, and appraisers. As part of these license requirements, you might need to buy a bond, depending on your profession.

The laws in your state will dictate which type of surety bond you need, such as a license or permit bond, and also the amount of the bond.

Whether you need a surety bond as part of the licensing process depends on the regulations in your state. You might also need to take courses, pass an exam, submit to a background check, or carry errors and omissions insurance (E&O). The surety company will usually do a credit check as part of the bonding process.

Here are a few examples of license bond requirements in different states:

• In Illinois, the Department of Financial and Professional Regulation (IDFPR) requires appraisal management companies (AMCs) to carry a $25,000 surety bond.
• In Massachusetts, the Board of Registration of Real Estate Brokers and Salespersons requires a $5,000 real estate broker surety bond.
• In California, the Department of Real Estate (DRE) does not require brokers to obtain surety bonds, but you must pass an exam in order to sell real estate.

Being bonded and insured can protect your real estate business against accidents, lawsuits, and other expensive disruptions. Insurance policies to consider include:

• Errors and omissions insurance: E&O insurance can pay for legal costs related to a real estate professional's work performance. It's also called professional liability insurance.
• General liability insurance: A general liability policy covers lawsuits from accidents that injure a client or damage their property. It's often the first type of coverage purchased by real estate businesses.
• Commercial auto insurance: State laws require commercial auto insurance for business-owned vehicles. This policy pays for legal costs and other expenses if your vehicle is involved in an accident.
• Business owner's policy (BOP): Real estate businesses that own or lease an office should consider bundling their general liability coverage with commercial property insurance in a BOP. It usually costs less than buying the policies separately.
• Workers' compensation insurance: Workers' comp helps pay for medical costs when an employee is injured on the job. Most states require this coverage as soon as a business hires its first employee.
• Cyber insurance: This policy helps real estate businesses survive costly data breaches and cyberattacks. It can cover client notification expenses and other associated costs.
• Commercial umbrella insurance: Umbrella insurance provides additional coverage for liability claims made on general liability, commercial auto, or employer’s liability insurance, once a policy's limit is reached.
• Lessor's risk only insurance (LRO): This policy protects commercial landlords from tenant lawsuits over property damage and injuries.