The right insurance mitigates the risks related to business, your home, death, car accidents, and more. Insurance agents understand that better than anyone else. It’s your role to help people purchase peace of mind through various insurance policies and products.
But as a broker, you also have your own risks. You might recommend the wrong product to clients or make administrative errors that lead to a financial loss. In this case, the client may sue, leaving you with legal fees and a potential damage award to pay for.
Even if you aren’t in the wrong, a client that sues because they believe you made an error can still swamp you in legal fees.
Errors and omissions (E&O) insurance covers legal fees and damage awards if a client or third-party sues you for negligence, misrepresentation, or inaccurate advice. It protects you and your business from the financial fallout of missteps, so you’re not surprised by costs if a lawsuit arises.
This article discusses what E&O insurance covers for insurance agents, how much E&O insurance agents need, and how much a policy might cost.
What does errors and omissions insurance cover for insurance agents?
At the most basic level, E&O insurance coverage protects you and your business from legal claims resulting from mistakes in your professional service. It encompasses issues related to actual or alleged negligence or misrepresentation.
For insurance agents, this might include:
- Failure to provide the proper insurance
- Administrative errors
- Incorrect representation of what a particular policy covers
- Improper execution of policy changes
- Failure to recommend the appropriate product to a client
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Examples of when you might claim your E&O insurance
Suppose you’re a life insurance agent. A couple visits your office looking for help on their life insurance needs. They explain their situation, and you set them up with a specific product. One of the spouses passes away a year later, but the life insurance policy doesn’t execute how you explained it would.
In this case, the customer you recommended that life insurance product to may sue for negligence or misrepresentation. This could result in legal expenses and the need to pay court costs.
The right E&O insurance covers both the legal fees and the award costs, so you don’t face the financial fallout of such a situation yourself.
In another case, suppose you broker car insurance. A client comes in to insure their new vehicle, and you two hammer out the details. You mistakenly enter the incorrect vehicle details as you help them set up their policy.
Such an error might void that client’s insurance. If the person can’t claim their car insurance when they need it, they might seek compensation from your business instead.
Again, the proper E&O insurance pays for any legal costs or damage awards on your behalf.
Alleged claims of negligence or misrepresentation
Although you’re an expert and might rarely make mistakes, a client only needs to perceive you were negligent to file a legal claim. If you double-checked everything and made sure there were no errors, an angry client may still sue because they think you made a mistake.
These alleged claims of negligence or misrepresentation still require you to hire a defence lawyer. Additionally, a plaintiff might have just enough evidence to prove you failed to live up to your duty of care as their insurance agent. This may mean liability for damage award costs as well.
The right E&O insurance covers your business when you face an alleged claim of negligence, misrepresentation, or inaccurate advice, even if you’re not in the wrong.
How much E&O insurance does an insurance broker need?
You commonly see brokers and other professionals with liability coverage between $1 million and $2 million. The amount of E&O insurance you need depends on your business and risk tolerance.
Lawsuits are expensive ordeals, and it’s essential to have the right coverage. If your legal fees or damage awards exceed your coverage limit, the remainder must come out of your own pocket.
You should also consider the insurers you work with. As a broker selling insurance products, certain insurance companies might require you to purchase E&O insurance. Their requirements may further mandate a minimum amount of coverage.
How much is E&O insurance for insurance agents?
The price of E&O insurance for insurance agents depends on several factors, such as:
- Your business’s size and location — larger companies have more risks
- Your policy’s coverage limit and deductible — the higher your coverage limit and the lower your deductible, the higher your premiums
- The types of insurance you sell
- Claim and legal history — prior insurance claims or a history of lawsuits against your business can result in higher premiums
With APOLLO, E&O policies start as low as $18.15 per month. Get a quote and buy online in under 5 minutes today without leaving the comfort of your own home.
E&O insurance is an essential part of your insurance business. It can protect you from actual and alleged legal claims if a client feels you provided a negligent or misrepresented service. Ultimately, the right policy means you won’t have to fret and pay legal fees and damage awards out of pocket.
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