Within the province of Ontario, mortgage brokers are required to jump through several hurdles, before they can begin serving the locals. Since Ontario is the most populous province in the entire country, it is truly in your best interest to meet these requirements, so you can access this enormous customer base. One of the most pertinent steps to take is obtaining the appropriate E&O insurance. There are specific requirements for mortgage brokers in this province. These requirements will be explored in greater depth below.
The 2006 Act
The Mortgage Brokerages, Lenders and Administrators Act was passed in 2006. The law makes it a requirement that mortgage brokers have E&O insurance and that the insurance is approved by the Superintendent. These guidelines help to determine the minimum requirements and other acknowledgements. In general, the insurance coverage must be able to pay a minimum of $500,000 for any one occurrence. And, it must cover $1 million for all occurrences during an entire calendar year.
The act also makes it a requirement that the insurance include a “Fraud” endorsement. This helps to protect the public from fraudulent acts. Also, remember that the insurer must provide you with written confirmation of the insurance coverage. Make sure that the policy offered by your insurer has been approved by the FSCO.
Real Estate Council Of Ontario And E&O Insurance
While the Real Estate Council of Ontario, RECO, offers E&O insurance policies to registered real estate brokers, it is important to remember that this does not cover mortgage brokers or administrators. Also, those that have errors and omissions insurance under the Insurance Act or the Registered Insurance Brokers Act are generally not covered for these specific activities. Therefore, mortgage brokers will be required to obtain this type of coverage separately. This is true, even if you already have E&O insurance coverage through RECO.
Understanding E&O Insurance
Now that you’ve learned a little more about the requirements of errors and omissions insurance for mortgage brokers, it is time to delve into the concept of E&O insurance. What is it and how does it work? Errors and Omissions insurance is a specific type of insurance that will greatly protect your company. In general, the insurance is designed to protect you from claims that your company has failed to perform or has been negligent. While some specific professionals need E&O insurance more than others, all can be held liable and therefore can benefit from being covered by this type of insurance.
Why You Need E&O Insurance
The truth of the matter is that anyone can become a target and therefore, you need E&O insurance. And of course, you need to remember that mortgage brokers tend to be at a higher risk than others. This coverage can provide you with protection in terms of legal costs and any payments that you will be required to make to your client. It is essential to remember that the legal costs in Canada can easily bankrupt any company. Therefore, it is absolutely essential to protect your business with this coverage, regardless of the costs!
Canada’s real estate market is continually changing and mortgage brokers are often put under a microscope. Someone in your line of work will receive scrutiny for failing to properly advise the client of their options and even the impact of interest rates. Also, you may be found negligent, if you fail to inform the client of their ability to refinance. With so many potential problems, it is essential to acquire this insurance, so you can sleep soundly at night.
Some Banks Require It
Mortgage brokers work very closely with banks, in order to obtain loans for their clients. Today, many Canadian banks will refuse to work with mortgage brokers, unless they’ve obtained a sufficient amount of Errors and Omissions Insurance Ontario from a Canadian licensed Insurance company. The limitations differ from one bank to another. Therefore, you will need to consult with your bank of choice to figure out your precise requirements. Nonetheless, all mortgage brokers that intend to ply their trade in Ontario will need to obtain E&O insurance first!
Understanding Your Costs
The mass majority of mortgage brokers will be worried about the costs of this type of insurance. This is totally understandable. However, you need to realize that the price of E&O insurance is never universal. Instead, the cost tends to deviate from one professional to the next based on various factors. In general, the most common factors include yearly revenue, number of agents, and your company’s loss history. You should also remember that some businesses will be considered riskier than others. Therefore, mortgage brokers may be required to pay a little more than website developers.
The most definite way to obtain an accurate price is to submit an application and consult with an insurance provider. This will help you get started, while simultaneously allowing you to know precisely how much you will be required to pay.