Insurance changes for Home Inspectors

7041125677 • August 15, 2025

Insurance changes for Home Inspectors - how does it affect you?

New Arkansas Rule: Home Inspectors Must Carry E&O/Professional Liability (Effective Aug. 5, 2025)

On April 22, 2025, Arkansas enacted **Act 974 (HB1625)**, changing the insurance requirement for licensed home inspectors. Instead of general liability being the only mandated coverage, inspectors must now carry **a professional liability (Errors & Omissions, “E&O”) insurance policy** approved by the State Insurance Department, with minimum limits of **\$100,000**. The law takes effect **Tuesday, August 5, 2025**—91 days after the Legislature’s sine die adjournment on May 5, 2025. ([Arkansas Legislature][1], [Mitchell Williams Law][2])

--Who’s behind the change?

Oversight of home inspectors now falls under the **State Board of Appraisers, Abstracters, and Home Inspectors**, created through recent consolidation of real estate-related licensing boards. ([Arkansas Division of Workforce Services][3], [Appraisal Subcommittee][4], [Arkansas Advocate][5])

--What changed—exactly?

**Old rule:** Carry general liability (GL), typically covering bodily injury or property damage during an inspection (e.g., “ladder hits a car”).
**New rule (effective Aug. 5, 2025):** Carry **professional liability/E&O** for the **professional services** you provide (e.g., an alleged inspection error or omission that leads to a client’s financial loss). Minimum limit: **\$100,000**. ([Arkansas Legislature][1])

> Practical takeaway: GL protects against accidents; **E&O** protects your **judgment, reporting, and advice**—the core risks of inspecting.

--Why this can raise inspection costs

* **Higher premiums than GL:** E&O is usually priced higher than a basic GL policy because the severity of claims (defense + indemnity for alleged errors) can be larger. Trade press and summaries of the act highlight the state’s shift toward more specialized protection for consumers—i.e., E&O. ([Insurance Business][6])
* **Claims-made coverage dynamics:** Most E&O is **claims-made**, meaning current-year pricing reflects industry claims trends and your prior history; tail/retro coverage adds cost. (Industry standard characteristic; check your policy form.)
* **Underwriting factors:** Fee levels, services offered (e.g., pools, septic, sewer scope, drones), experience, prior claims, and the counties you serve can move rates.
* **Defense costs:** Legal defense often erodes limits unless your policy states otherwise, so carriers price for that exposure.

Even modest annual increases in your overhead may need to be reflected in your **inspection fees** to keep margins intact.

-How to soften the impact (monthly payments + smart policy design)

--- 1) Choose a monthly payment option

Most carriers or brokers offer one of the following so you don’t take a big cash hit up front:

* **Carrier direct monthly EFT:** A small installment fee, but the simplest option.
* **Premium finance agreement:** A third-party finances the annual premium; you pay **monthly** with a finance charge (interest).
* **Broker-administered pay plan:** Similar to EFT, sometimes with lower fees if you bundle GL + E&O.

Ask specifically:

* “Do you offer **12-pay** with autopay?”
* “What’s the **APR/finance fee** and any down payment?”
* “Any discount for **paperless/autopay**?”
  These options can spread a \$1,500–\$3,000 annual premium across monthly cash flow instead of one lump sum.

--- 2) Tune your coverage to your risk (without going bare)

* **Deductible:** If you can absorb small losses, a slightly higher deductible can trim the annual premium.
* **Endorsements:** Add only what you need (sewer scope, IR thermography, termite/WDI if applicable, ancillary services you actually sell).
* **Appropriate limits:** Meet the state’s **\$100,000** minimum, but consider whether **\$250k or \$500k** fits your job mix and referral partners’ expectations. ([Arkansas Legislature][1])

--- 3) Reduce claims frequency (carriers reward it)

* **Crystal-clear scope & contract:** Use plain language about what’s inspected/not inspected; get signatures before you arrive.
* **Photographic documentation:** Lots of photos, especially on “no access” or “limited access” areas.
* **Report clarity & speed:** Flag “material defects” prominently and send reports promptly to reduce post-closing surprises.
* **CE & SOP alignment:** Maintain continuing education and follow Arkansas SOP/administrative rules closely; board-approved CE is available regularly. ([InterNACHI®️ Forum][7])

---4) Adjust your pricing—gently and transparently

If E&O adds, say, **\$10–\$25 per inspection** to your overhead, consider:

* A **small across-the-board fee adjustment**, or
* Tiered pricing (age/size/add-ons) that naturally absorbs the cost.
  Explain to clients and agents that Arkansas now **requires** professional liability/E\&O to better protect consumers—most appreciate the added protection and professionalism. ([Arkansas Legislature][1])

- Key dates & references (so you can cite them in your emails)

* **Act 974 (HB1625) approved:** **April 22, 2025**. ([Arkansas Legislature][1])
* **95th General Assembly adjourned sine die:** **May 5, 2025**. ([Arkansas Legislature][8])
* **Default effective date for acts without an emergency clause:** **91st day after sine die** → **Tuesday, Aug. 5, 2025** (per legal summaries referencing the AG’s interpretation). ([JD Supra][9], [Mitchell Williams Law][2])
* **Oversight board:** **State Board of Appraisers, Abstracters, and Home Inspectors** (within the AR Dept. of Labor & Licensing). ([Arkansas Division of Workforce Services][3])

---

--Bottom line

Starting **Aug. 5, 2025**, Arkansas home inspectors must carry **E&O/professional liability** (min. **\$100,000**). Expect some **premium-driven cost pressure**, but you can **smooth cash flow with monthly payments**, tailor coverage intelligently, and make a **modest, well-explained fee update**. It’s a change that elevates consumer protection—and, handled right, it won’t derail your budget. ([Arkansas Legislature][1], [Mitchell Williams Law][2])

If you’d like, I can tailor a short client/agent email announcement and a one-page checklist for comparing E&O quotes.

[1]: https://arkleg.state.ar.us/Acts/FTPDocument?ddBienniumSession=2025%2F2025R&file=974.pdf&path=%2FACTS%2F2025R%2FPublic%2F "HB1625 as engrossed on 03-13-2025 10:35:42"
[2]: https://www.mitchellwilliamslaw.com/2025-arkansas-insurance-legislation-summary-health?utm_source=chatgpt.com "2025 Arkansas Insurance Legislation Summary: Health"
[3]: https://labor.arkansas.gov/licensing/abstracters-board/?utm_source=chatgpt.com "Arkansas Abstracters Board"
[4]: https://www.asc.gov/taxonomy/term/21?utm_source=chatgpt.com "AR | ASC gov"
[5]: https://arkansasadvocate.com/briefs/arkansas-licensing-board-for-home-inspectors-will-be-combined-with-two-others-under-bill/?utm_source=chatgpt.com "Arkansas licensing board for home inspectors will be combined with ..."
[6]: https://www.insurancebusinessmag.com/us/news/professional-liability/arkansas-mandates-eando-or-professional-liability-insurance-for-licensed-home-inspectors-under-hb1625-534681.aspx?utm_source=chatgpt.com "Arkansas mandates E&O or professional liability insurance for ..."
[7]: https://forum.nachi.org/t/arkansas-state-board-of-appraisers-abstracters-home-inspectors-approves-internachi-s-webinars-for-live-continuing-education-ce-credits-for-arkansas-licensed-home-inspectors-25-standards-every-inspector-should-know/255277?utm_source=chatgpt.com "Arkansas State Board of Appraisers, Abstracters, & Home Inspectors ..."
[8]: https://arkleg.state.ar.us/Home?ddBienniumSession=2025%2F2025R&utm_source=chatgpt.com "Home Page - Arkansas State Legislature"
[9]: https://www.jdsupra.com/legalnews/2025-arkansas-insurance-legislation-3186467/?utm_source=chatgpt.com "2025 Arkansas Insurance Legislation Summary: General | JD Supra"

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For sellers: Improve insulation and ventilation before listing the home. It’s an easy way to make the home more attractive, especially to energy-conscious buyers. How Home Inspectors Provide Value A home inspector’s primary goal is to educate buyers and sellers, providing them with a clear understanding of the property’s condition. For homebuyers, this means peace of mind and helping them avoid unexpected repair costs. For sellers, an inspection can highlight areas to fix before listing, which can lead to a quicker sale and a stronger negotiating position. By focusing on clear communication, honesty, and detailed reporting, home inspectors serve as trusted advisors in the real estate process. Both buyers and sellers can make informed decisions, ensuring a smoother and more transparent transaction. Conclusion Whether you’re helping homebuyers avoid a money pit or assisting sellers in preparing their homes for market, a thorough home inspection is invaluable. 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