By: Michael Miller, Smart Choice® State Director
If you’re an insurance agent, you need errors & omissions, or E&O, insurance. This valuable coverage protects you and your agency against a loss in the event of an error or omission you or your staff make (or are accused of making). This could include something as simple as lacking a required document, such as a waiver of coverage, or miscommunication between you and a client.
Here are three things you need to know about E&O insurance for your agency.
1. You need to do your research.
Many carriers offer E&O coverage, but not all E&O policies are created equal, especially in what they cover if a claim makes it to court. Some may pay for the settlement amount but not your defense expenses, such as attorney’s fees. Others pay defense expenses but not for actual losses. Comprehensive E&O coverage will pay for all of it.
Some carriers specialize in covering a particular industry, so make sure the carrier you pick caters to the specific needs of your agency.
2. You need to buy early.
You advise your clients to buy insurance before they need it, and the same is true of your E&O coverage. The longer you go without E&O, the longer you expose yourself, your staff, and your agency to more risk. Most E&O policies use a retroactive date to determine whether or not they’ll cover a claim. Any claim made over an error or omission that occurs before that date will not be covered by your E&O policy. That’s why you need to be covered early—even before you open your doors.
When it is time to leave the insurance industry (when you retire, sell or quit) you may want to consider that your policy holders, clients, and carriers may not leave the same time that you do. You may still hold responsibility to them for a period of one year after you issued the last policy or until the anniversary or renewal date of the last policy you issued, at which time the insured is expected to contact you with corrections as to how the policy was applied for when it was first written.
Most agents maintain an active E&O policy for one year after their retirement or termination date. It protects them from potential risk from policies written during their last year in business. Almost all carrier policies state the insured is responsible for reviewing their declarations page at every renewal so they are aware of their exact coverage, effective dates, and limits. You may want to consider carrying a full and active E&O policy for one year after you write your last policy to protect yourself from any issues that could arise for a period of one year after the renewal date of the last policy you issue.
3. You need to have a plan.
Even with E&O coverage, you need a plan for how your agency will prevent errors and omissions and mitigate claims if and when they occur. Always use written contracts with your clients and get signed waivers when clients opt out of coverages you’ve recommended for them. Communicate frequently with your clients about changes to their policies and possible enhancements.
- Independent Agents