E&O Insurance for Insurance Agents – Explained
Errors and omissions (E&O) insurance provides coverage in the event of a lawsuit from a client claiming your business to be negligent or at fault. Even as an expert in your field, you are not immune from making mistakes. These mistakes, no matter how small, can result in a lawsuit that can be financially disastrous for your company.
Insurance agents and agencies are no different. A recent paper on Insurance Agent/Broker Errors and Omissions Claims suggested that the number of E&O lawsuits against insurance agents seem to be on the rise. As an insurance agent, you have to exercise good faith and reasonable diligence in obtaining insurance requested by a client. If clients feel that they have been misinformed about a policy or that they have inadequate coverage as per their needs, you might find yourself at the end of an E&O claim.
For example, let’s say you are a pet insurance provider. Unfortunately, you fail to explain that the policy does not cover pre-existing pet conditions. Your client finds out that they have not been adequately informed and decides to file a claim against you, accusing you of negligence. In this case, even if you were not the party at fault, you would still be liable to pay for the court fees until the situation is resolved. So, E&O insurance would save you a lot of trouble in such instances.
E&O insurance for insurance agents is a necessity in today’s world where it’s raining lawsuits. An E&O policy will help you cover for the following:
- Court and administrative costs
- Judgments
- Defense costs
- Claims for past services provided
- Claims and damages etc.
The costs of E&O insurance for insurance agents may vary from one company to another. Even factors like the size of your agency, the types of practices, and policy limits can have an impact on premium costs. However, it’s a small price to pay to protect your agency from going potentially bankrupt.
Not all policies are created equal. Some policies might exclude some types of coverages and include others. Be sure to contact multiple carriers before making the right choice for your agency.