Insurance agents do a great job making sure that their clients are insured against all the risks they might face, including auto accidents, hurricanes, fires, even a guest who slips and falls at their home. But are the agents themselves properly insured?
Insurance agents can make mistakes, just like anybody else. Most are aware of the risks and know how important it is that they have errors and omissions, or E&O, insurance coverage. But not all agents carry this important coverage.
What is E&O?
E&O coverage is insurance protection against something you do that you shouldn’t (an error) or something you should have done, but you didn’t (an omission). In some professions, like healthcare, it’s referred to as malpractice insurance. It protects you if a client sues you.
Why Do You Need It?
Why would an insurance agent need E&O insurance? Here are a couple of examples of when it would come in handy.
A Dissatisfied Client
An elderly client comes to you and says they are worried because they don’t have any life insurance. You know they have several medical conditions, so you suggest a guaranteed issue policy. The client says that’s fine; he just wants something that will pay for his funeral, so his wife doesn’t have to worry about it.
You explain the limitation of the guaranteed issues policy, such as the low face amount and the fact that if he dies within two years, his beneficiary gets a return of premium, not the policy’s face value. He says he understands this.
Five months later, the client’s wife calls you to report that the client died. She wants to know what she needs to do to get the $25,000 death benefit from the guaranteed issue policy he purchased from you. You explain that she will only get a return of the premiums paid because he died within two years of purchasing the policy. The wife gets upset and sues you.
You didn’t do anything wrong, and it’s highly unlikely that she would prevail in court. But you need to hire an attorney and may have to take time away from the office to defend yourself. These costs could be covered by and E&O policy.
An Employee Error
You hire a new administrative person in your office. They are getting to the point where they can do most things on their own, but you ask one of your senior people to check everything just to be sure.
A longtime client calls in to add their teenaged child to their auto insurance. The young man has just gotten his driver’s license. The new admin takes the call and tells the client that he will make the change, but he’s never done this before. He goes to ask the senior admin for help, but she’s at lunch. He puts the request aside, and it gets buried under a stack of papers and doesn’t get processed.
A week later, the client calls and says his son has had a car accident, and their nearly new car is totaled. You look up the policy and see that the new driver was never added. Your E&O policy should cover the costs that the client’s policy won’t.
What if You Already Have It?
Just as you recommend that your clients review their insurance protection every few years, you should review your E&O coverage. If your book of business has grown, you may need more coverage. If you’ve hired more employees or acquired another agent’s book of business, you definitely need to review your policy, and will probably need to increase your limits.
People make mistakes. The more people who work for you, the more likely a mistake will be made. By purchasing adequate E&O insurance, you’re protecting your business – and setting a good example for your clients.
All information provided in this blog is for informational purposes only. The sources used are presumed accurate. CITA Insurance Services, Brown & Brown Program Insurance Services, Inc. and Brown & Brown, Inc. will not be liable for any errors, omissions, losses, injuries or damages arising from its display or use and will not assume responsibility for any misguided information. No guarantees are implied.