EOforLess.com http://www.eoforless.com Errors and Omissions Insurance for Less! Mon, 01 Apr 2013 20:08:27 +0000 en-US hourly 1 http://wordpress.org/?v=3.5.1 How to Sell Suitable Annuities http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/eight-ways-to-sell-suitable-annuities/ http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/eight-ways-to-sell-suitable-annuities/#comments Thu, 29 Mar 2012 19:02:26 +0000 National Ethics Association http://eo.ethicsdev.com/?p=2117
  • Focus on being a true professional. True professionals make suitable recommendations to their clients. If they recommend products or services that serve other agendas, they are no longer true professionals Professionalism implies an agent has listened to a client’s desires, financial goals, and constraints. It also implies the agent’s recommendations fall within generally accepted standards of best practices. Being a true professional implies the agent strives to meet the client’s needs first, never his or her own.
  • Rediscover the joys of fact-finding. True professionals don’t rush to close a sale in the first meeting. They patiently take the time to thoroughly assess the unique needs of their clients before making any product recommendations This may include following a measured process, spanning several interviews, of obtaining relevant client data.
  • Make good use of your suitability forms. Yes, they can be annoying to fill out. But if you use them with every client, making sure to ask all the questions, you will almost always be on safe ground.
  • Fully document your client meetings. Take good notes during all client meetings, being careful to record any information that supports your product recommendation. Also, ask and then record answers to questions such as when clients will need access to their money and/or when any income distributions will be needed. Then document their clear understanding of guaranteed features, including living benefit options. What the client tells you will help you select a financial product with a suitable surrender period, among other features.
  • Maintain client records for five years or longer if your state requires it. This applies especially to information that supports your product recommendation.
  • Broaden your in depth knowledge of multiple financial products to properly meet client needs. In other words, avoid becoming a “one-trick product pony.” Instead, master a variety of product solutions that address a broad range of customer needs.
  • Help your clients understand how to get access to their money. In the case of annuities, make sure clients know when and under what terms they can access their money. Be doubly sure they sign off on-and fully understand-all surrender period definitions and potential surrender charges.
    • When in doubt about whether your recommendations are suitable, always do the right thing. The best defense against errors-and-omissions claims is to simply treat your clients ethically. This will prevent unsuitable sales, client complaints, and E&O nightmares no agent needs.]]>     http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/eight-ways-to-sell-suitable-annuities/feed/ 0     Eight Ways to Hire Honest Employees http://www.eoforless.com/uncategorized/eight-ways-to-hire-honest-employees/ http://www.eoforless.com/uncategorized/eight-ways-to-hire-honest-employees/#comments Wed, 28 Mar 2012 22:23:00 +0000 National Ethics Association http://eo.ethicsdev.com/?p=2076 Dishonest employees don’t just cost hard dollars, they also do irreparable harm to a financial professional’s reputation. When employee crime becomes news, potential customers will hear about it on the Internet. Why would they choose a tarnished advisor when so many other options are a Google search away?
    Solution? Protect your reputation by only hiring the best employees. This means you’ll need to integrate ethics/honesty screening into every step of your hiring process.
    What to Do:
    1. Be clear about the type of employee you want to hire. Ahead of time, write out a detailed profile of the desired attitudes, skills, and moral values you’re looking for. Then during the hiring process, don’t settle for anything less than your ideal candidate. Most importantly, listen to your “gut.” If a candidate feels wrong, terminate the process immediately.
    2. In your help wanted announcements, make clear your firm believes in ethical business practices. Integrate phrases from your Core Values Statement in your job postings. Then state that you are looking for candidates who share your beliefs. Also point out that you will be conducting full background checks and drug screens on all candidates.
    3. Go over the submitted resumes. Winnow out clearly unqualified people. But also look for ethical red flags: unusual career transitions, decreasing accountabilities, and long, unexplained periods between jobs. Also look for job titles and accountabilities that seem out of proportion to the candidate’s training and experience. Conversely, people who have been entrusted with large projects and budgets and many employees to supervise have shown they are trustworthy.
    4. After you screen out inappropriate candidates, candidates who generally fit with your requirements will remain. Invite a manageable number in for interviews.
    5. Have them fill out an application. Knowing that many people “fudge” their answers, “sell” them on the importance of being honest. Say something like: “We take honesty seriously around here. So please fill out this application, making sure your answers are totally accurate and complete. Also, answer all the questions about recent jobs and please include the actual reasons for leaving. We will be checking with prior employers, so again, please be truthful.”
    6. After they complete the application, have a short meeting to review the information and explain your selection process, which should include administering an honesty assessment. The reason for a short meeting (half an hour or less) is you don’t want to waste time with people who won’t pass your test. If you’re not currently using one, search the Internet for possibilities. Three well-known and well-respected instruments are the Personnel Selection Inventory (PSI), the Reid Report Risk Assessment, and the Veracity Analysis Questionnaire (VAQ).
    7. Once you receive the honesty test results, screen out the problematic candidates. Then call the remainder in for more detailed interviews. Go over all prior jobs and discuss their reasons for leaving and future career goals. But also probe for ethical job behaviors and attitudes. Here are some good questions to ask:
    • Have you ever observed a work colleague stealing? What did you do about it?
    • Have you ever had a boss, colleague, or vendor ask you to do something wrong? How did it make you feel? What did you do about it?
    • Have you ever done anything yourself at work that bothered your conscience? What was it and how did you respond?
    The goal with these and similar questions isn’t just to hire someone who’s honest. Rather, it’s to hire someone who shares your core values. You can always train someone who’s missing desired skills. But it’s impossible to implant core values into someone who lacks them. And when those values are missing, watch out!
    8. OK, you’ve reached the end game. The last remaining candidates have great skills, interviewed well, and have no apparent ethics problems. But don’t relax yet. Now you need to check their references and order background and credit checks.
    Reference checks are important because they verify information uncovered elsewhere in the process. Try to speak to people’s direct supervisors, then probe for excessive absences, productivity issues, and most importantly, disciplinary problems. If the person will only confirm employment dates, see if they will answer just one question: “Is the person eligible for rehire?”
    Similarly, background checks are essential for rooting out criminal convictions or problematic civil lawsuits. Credit checks indicate financial instability. If you uncover large indebtedness, compare it with the candidate’s starting salary. If your job doesn’t pay enough to reasonably cover living expenses and debt payments, you’re asking for trouble. You can purchase all of these checks at a modest cost using services available on the Internet.
    If a candidate survives all of the prior steps, then make the person an offer. If he or she accepts it, congratulate the person for making an excellent decision-and yourself for bringing such an excellent person on board!  ]]>     http://www.eoforless.com/uncategorized/eight-ways-to-hire-honest-employees/feed/ 0     Protect Yourself with Full Disclosure http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/protect-yourself-with-full-disclosure/ http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/protect-yourself-with-full-disclosure/#comments Wed, 14 Mar 2012 21:02:04 +0000 National Ethics Association http://eo.ethicsdev.com/?p=2055 What exactly is disclosure? It’s nothing more than sharing facts about a product or strategy with a prospective client. The sharing of information should be robust and the goal of sharing should be to help the person weigh the pluses and minuses of the recommendation and to make an informed decision.   If you’re a life insurance agent, disclosure is particularly essential because of the nature of the life insurance contract. According to Ron Duska, professor of ethics at The American College, life insurance contracts are not negotiated. Instead, they are contracts of adhesion, which means they are devised by the insurer and must be bought or rejected by the client. Because of this, insurance companies bear the burden of educating policyowners about their contracts, a burden shared by agents since they represent the insurance carrier.  
    How much are you ethically obligated to disclose?
    What you are legally obligated to disclose is the starting point for this answer. Certain financial licenses may require specific disclosures of business background, practices, or fees. Failing to comply with these regulations is a serious matter. But assuming you do comply with the minimum disclosures required by your license type, how much further should you go? We believe you should disclose as much as possible, especially if non-disclosure would lead a client to think you held information back for financial gain.   Obviously if you have to choose between a product that is a little better for the client, but not quite as good for you (lower commission), the choice should be clear. The client’s needs must be put in front of your own. You’d obviously disclose all the pertinent facts about that product to the client.   On the other hand if you have two products that are equally beneficial to the client. Then there is nothing wrong if one pays more commission to you. Most consumers do not mind you making moneybecause it makes you more vested in serving them. This is especially true when that money does not come from their pocket as is the case for fixed annuities and most life insurance policies. Under this scenario, if the client were to ask about your compensation, you should feel free to explain the higher compensation for the reasons just described. And if the client doesn’t ask, you may still want to disclose, assuming you’re comfortable doing so.   Perhaps the general rule is this: disclose more rather than less, especially when not disclosing might cast doubts on whose interests you serve.  
    What exactly should you disclose?
    Again, that varies by license type, but generally disclosures fall into four basic areas.  
    • Information about the product cibsyners are considering purchasing, including specific details that define how the product works, its material risks, and its future performance.
     
    • Information about the carrier that will provide the product, including carrier ratings and track record.
     
    • Information about the application and any underwriting process, especially about the risks of providing false medical information for health, life or disability insurance.
     
    • Information about the specific product illustration provided in your sales presentation, especially the difference between future values that are projected vs. guaranteed.
     
    How should you document your disclosures?
    Professor Duska provides some excellent advice here. He suggests you document three things:  
    • The reason for the product recommendation, including specific facts that led you to conclude that the proposed product was suitable for the client.
     
    • Copies of any illustrations upon which the sale was made, including the client’s signature.
     
    • A disclosure statement, which briefly defines the key product features, benefits, costs and term period, again with the client’s signature.
      We’d also add one additional item that can prevent a lot of grief if your client passes away and you begin dealing with beneficiaries. That would be a document that defines the client’s wishes regarding the disposition of funds relating to beneficiaries. Because beneficiaries often challenge the decisions of their deceased parents, it’s best to document those decisions very carefully in writing while the parent is still alive.  
    What do you stand to lose and to gain from full disclosure?
    When you disclose fully, you may lose some commission dollars or maybe the sale itself. But you stand to gain much more from the stronger client trust—and more solid relationship—that will ensue. Never take a short-term view on ethical issues such as disclosure. The power of ethical conduct only becomes evident over the years as your reputation builds and begins to pay dividends such as more referrals, longer client retention, and higher income.   Perhaps the strongest case for full disclosure is the positive affect it has on one’s stress level. When your default position is more disclosure, not less, then ethical quandaries and self-disputes vanish, and you just do what comes naturally. Plus, when your philosophy is to share fully with clients, you will experience the serenity that comes from educating the client and letting the chips fall where they may. Whether you make more or less money as a result, you still win!   So here’s the bottom line: Don’t skimp on disclosure. Get serious about sharing information with your clients. I promise you they will reward you with trust and loyalty beyond measure.    ]]>     http://www.eoforless.com/eo-hq/errors-and-omissions-insurance/protect-yourself-with-full-disclosure/feed/ 0     E&O Insurance: Finding the Right Features http://www.eoforless.com/eo-hq/eo-insurance-finding-the-right-features/ http://www.eoforless.com/eo-hq/eo-insurance-finding-the-right-features/#comments Tue, 28 Feb 2012 19:07:01 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1965 Adequate liability coverage All E&O policies include liability coverage that protects you from financial loss due to a lawsuit arising from your error or omission. Liability coverage has two parts:   • Per Individual Claim – Usually, there is a limit per incident or claim. The typical individual limit is $1 million. This means that any single liability claim resulting from a lawsuit will pay no more than $1 million.   • Aggregate – Each E&O policy has an annual aggregate that limits how much an insurance company will pay each year. The usual annual aggregate is $2 million. That means the insurance company will pay on multiple claims up to, but no more than, $2 million. Some insurance companies state a lifetime policy aggregate limit rather than an annual aggregate. Be sure the lifetime limit is adequate if you go this route.   Remember, a general liability policy only covers incidents that affect bodily injury due to negligence from property or product safety. It does not cover financial loss to clients. Be sure to get adequate professional liability coverage from a high-quality E&O policy.  

    Legal and court costs

    Whenever you are served legal papers that name you in a lawsuit, it will cost money just to defend yourself. Legal fees and potential court costs add up quickly and can turn even a small claim into a giant financial burden when you consider the total court and legal fees involved. Look for this important provision in your E&O policy to shield you from these damaging expenses.  

    Post-retirement claims coverage

    E&O claims do not always arise while you are in business. They may surface years later after you’ve retired and a past client files suit against you. Your E&O insurance policy should have a provision to cover any claims that occur post retirement. This assures you will not be exposed to great financial risk after you stop working.  

    Employee or administrative coverage

    Most financial professionals have employees or staff who serve clients directly. When they make a mistake or fail to carry out a required task, you will be held accountable. Employee or administrative coverage protects you from employee E&O risk.  

    Coverage extension to spouses, domestic partners, legal representatives, or beneficiaries

    Nobody wants to have their family or other loved ones affected by a lawsuit. Some cases may name spouses as an actual defendant, even though they had nothing to do with the main financial professional’s business. Protect your loved ones with this important coverage feature.  

    Coverage flexibility

    Make sure your E&O policy can be adjusted for whatever products and services you provide. Basic policies cover you for the sale and servicing of life, accident, and health products. But also look for optional coverage for fixed and indexed annuities, variable products and mutual funds, disability insurance, and RIA Series 65.  ]]>     http://www.eoforless.com/eo-hq/eo-insurance-finding-the-right-features/feed/ 0     Top Five Ways to Save Money on Your E&O Insurance http://www.eoforless.com/eo-hq/top-five-ways-to-save-money-on-your-eo-insurance/ http://www.eoforless.com/eo-hq/top-five-ways-to-save-money-on-your-eo-insurance/#comments Tue, 28 Feb 2012 19:06:06 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1913 1. Take advantage of your clean record. If you do business responsibly, chances are you’ve never been sued or have other black marks on your record. If so, check with www.EOforLess.com. It provides low-cost E&O insurance for advisors who can prove they do business responsibly.  
    2. Leverage your relationships with third-party entities.
    Many field marketing organizations (FMOs) and member associations have deals with E&O insurers that can save you money. But be careful that their deals don’t rob you of your independence. For example, some FMO make your E&O coverage contingent on staying with them or on putting a certain level of business through them.  
    3. Comparison shop.
    Premiums are all over the lot, depending on the insurance company. So make sure to get quotes from several carriers. Also, keep in mind that E&O insurance companies don’t typically put advisors through an underwriting process to assess risk. They charge a “one-size-fits all” premium regardless of risk status. So try to find a carrier that will reward your low-risk status with lower premiums.  
    4. Buy the right coverage.
    The key here is to customize your E&O insurance for your precise business activities. Don’t pay more to cover products or services you never provide. But don’t skimp on protection, either. If your policy is too “lean,” you may end up unprotected against a serious errors and omissions insurance claim.  
    5. Watch out for non-regulated E&O providers.
    Some entities provide bargain-basement E&O insurance through so-called “risk-sharing plans.” No state insurance departments check their books or require them to hold minimum reserves. If such a plan fails, you will be left holding the bag. Instead, try to do business with a true insurance company that rewards low-risk advisors with a lower premium.   So don’t delay. Follow these tips now to find affordable, high-quality errors and omissions insurance. Your business—and budget—will thank you for it.  ]]>     http://www.eoforless.com/eo-hq/top-five-ways-to-save-money-on-your-eo-insurance/feed/ 0     E&O Claim Prevention: The Case of the Wavering Waiver http://www.eoforless.com/eo-hq/eo-claim-prevention-the-case-of-the-wavering-waiver/ http://www.eoforless.com/eo-hq/eo-claim-prevention-the-case-of-the-wavering-waiver/#comments Tue, 28 Feb 2012 19:03:48 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1947 The Incident An agent writes a $1,000,000 life insurance policy on his then 36-year-old male client. The client requests a premium waiver in case he ever gets disabled. The agent assures the client the policy will be issued with the rider. However, the policy is issued without one. The client receives the policy, never looks at it, and places it in a drawer for safekeeping. Years go by and the client pays his premium faithfully. One day, on his way home from work, he loses control of his car on the highway due to an oil tanker spill. He’s seriously injured. Ultimately, he loses use of an arm and goes on long-term disability. Months pass and the client still can’t work. Since he can no longer afford to pay for his life insurance, he tells the company he wants his premiums waived. The company responds that the policy has no such rider. The policy lapses due to non-payment of premium. Eventually, the client dies from his injuries. The client’s beneficiaries file a death claim with the insurer, which is denied because the policy is no longer in force.  

    The Claim

    The client’s beneficiaries sue the agent and the carrier for negligence, breach of contract, bad faith, misrepresentation, and violation of consumer protection laws.  

    The Outcome

    The agent insists the client never requested a premium waiver. But he has no proof of this. The client’s beneficiaries claim their loved one asked for the rider in the initial sales interview and that he always believed he had one. Because the claim is a he-said/she-said scenario, backed by conduct consistent with the client’s believing he had the rider, the insurance company is unable to defend the agent. It settles the claim out of court.  

    The Takeaway

    Agents can avoid such E&O claims by: • Documenting all client requests in writing. • Filling out the application line by line during the sales interview. • At the end of the meeting, confirming what the client bought. • At policy delivery, reviewing the policy benefits one more time. • Always encouraging clients to ask questions about their coverage.  ]]>     http://www.eoforless.com/eo-hq/eo-claim-prevention-the-case-of-the-wavering-waiver/feed/ 0     Top Ten Ways to Prevent an E&O Insurance Claim http://www.eoforless.com/eo-hq/top-ten-ways-to-prevent-an-eo-insurance-claim/ http://www.eoforless.com/eo-hq/top-ten-ways-to-prevent-an-eo-insurance-claim/#comments Tue, 28 Feb 2012 19:03:08 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1941 Tip #1: Be a Consummate Professional. There is no short cut to professionalism. Do your homework and know what you’re recommending. Keep investing in your knowledge base by earning appropriate designations and attending professional development courses. Stay current on regulatory requirements.  

    Tip #2: Do Your Research.

    Make sure all products and investment programs you offer are registered with the appropriate regulatory authority and approved by your broker-dealer, registered-investment advisor, and insurance FMO.  

    Tip #3: Stay In Your Expertise Area.

    Only recommend products you fully understand and are licensed to sell. If you refer clients to other providers, make sure you can vouch for their competence and integrity.  

    Tip #4: Solicit Business Properly.

    Make sure your solicitation materials are above board. You never want to misrepresent who you are, what you do, or what you sell. And if required to, have your insurance company and/or broker-dealer approve your solicitation materials.  

    Tip #5: Practice Full Disclosure.

    Make sure to disclose all required information and be totally up front about your track record, business practices, and affiliated advisors and companies.  

    Tip #6: Do Thorough Fact-Finding

    When you first meet the client, take time to fully understand the person’s situation. Uncover and document all relevant facts. Do a careful job of assessing risk tolerance. Then set appropriate expectations for future results.  

    Tip #7: Link Your Recommendations to Documented Needs

    Make sure to present only suitable recommendations (preferably more than one). After the prospect agrees to buy, review the reasons for buying the product and get the prospect to agree in writing.  

    Tip #8: Educate Clients about What They Bought.

    Make sure clients understand what their product covers and doesn’t cover, as well as all moving parts, fees and expenses, and any underlying risks and guarantees. You can never over-educate a client.  

    Tip #9: Leave a Paper Trail.

    This is crucial. Always document the outcomes of key client conversations, decisions made, and coverages declined. And remember, no client interaction is irrelevant. Document every call or conversation no matter how trivial the subject matter. Doctors and attorneys do this, and so should you.  

    Tip #10: Promptly Resolve Client Complaints.

    If a client is unhappy with you, find out why. Then do your best to resolve the person’s complaint before it turns into a regulator sanction or lawsuit. Also, if you sense the client will file a formal complaint, let your compliance department know as soon as possible. Bottom line: Preventing future E&O insurance claims isn’t rocket science. But it does require careful planning, attention to detail, and commitment. The ten tips just described will get you started. The rest is up to you.  ]]>     http://www.eoforless.com/eo-hq/top-ten-ways-to-prevent-an-eo-insurance-claim/feed/ 0     Top Ten Things Every Advisor Should Know about E&O Insurance http://www.eoforless.com/eo-hq/top-ten-things-every-advisor-should-know-about-eo-insurance/ http://www.eoforless.com/eo-hq/top-ten-things-every-advisor-should-know-about-eo-insurance/#comments Tue, 28 Feb 2012 19:01:55 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1905 #1: You need it. In today’s economy, it’s just too risky to do business without errors and omissions (E&O) insurance. If you’re ill equipped to absorb $20,000 or more to settle a customer claim or spend $20,000 to $100,000+ to fight it, you definitely need E&O insurance.  
    #2: You’re probably paying too much for it.
    Problem is, most carriers charge a “one-size-fits-all” premium. That means low-risk insurance agents or financial advisors pay the same premium as higher-risk advisors.  
    #3: You can pay less for it.
    At least one insurance company rewards low-risk advisors by charging lower premiums. In return for proving they adhere to responsible business practices, such advisors can save 20% to 50% on their E&O insurance premiums. (See eo.ethicsdev.com for details.)  
    #4: Your policy must have these two features.
    Your errors and omissions policy should provide retroactive coverage, as well as an extended reporting period. The former means you’ll be protected going back to your first continuous period of E&O. The latter means you (or your heirs) will be covered for errors and omissions while you were working, even after you retire, change careers, become disabled, or die.  
    #5: You should customize your policy.
    Make sure your E&O policy covers your specific job activities. For example, if you are an investment advisor representative, then a standard life & health agent policy won’t do. In addition, know the specific limits of liability for each claim, as well as your annual aggregate, and total aggregate for all advisors in the program.  
    #6: You should always buy E&O insurance from a top rated insurance carrier.
    Avoid insurers with low marks from the various rating agencies. Also watch out for so-called “risk-sharing plans.” No state insurance departments check their books or require them to hold minimum reserves. If such a plan fails, you will be left holding the bag.  
    #7: Your policy should be free of handcuffs.
    Be careful when considering FMO-sponsored E&O insurance. It may lock you into the FMO by making your coverage contingent on staying with them or on writing a certain level of business with one of their carriers. Also, watch for coverage exclusions when you sell products outside the FMO.  
    #8: You should ask about post-sale service.
    Having a properly designed policy is the starting point. Also ask about who will provide post-sale service. Make sure the administrator is equipped to handle various payment options, has a responsive call center, and is committed to prompt claims processing.  
    #9: You should revisit your needs periodically.
    E&O insurance isn’t something to buy and put in the drawer until you need it. Every year or two, revisit your needs to make sure the policy is still appropriate.  
    #10: You should work hard to prevent E&O claims.
    Once you purchase an errors and omissions policy, get serious about preventing future claims. Three main strategies: recommit to high standards of ethics, make sure your office is well managed, and resolve complaints promptly. For more information, visit www.ethics.net.  ]]>     http://www.eoforless.com/eo-hq/top-ten-things-every-advisor-should-know-about-eo-insurance/feed/ 0     How to Avoid E&O Time Bombs http://www.eoforless.com/eo-hq/how-to-avoid-eo-time-bombs-2/ http://www.eoforless.com/eo-hq/how-to-avoid-eo-time-bombs-2/#comments Tue, 28 Feb 2012 19:01:19 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1956 here now to sign up for this no-obligation service.    ]]> http://www.eoforless.com/eo-hq/how-to-avoid-eo-time-bombs-2/feed/ 0 How important is selling suitable products and what suggestions do you have for doing so? http://www.eoforless.com/uncategorized/how-important-is-selling-suitable-products-and-what-suggestions-do-you-have-for-doing-so-2/ http://www.eoforless.com/uncategorized/how-important-is-selling-suitable-products-and-what-suggestions-do-you-have-for-doing-so-2/#comments Mon, 20 Feb 2012 20:13:37 +0000 National Ethics Association http://eo.ethicsdev.com/?p=1890 Ask National Ethics Association…

    Q: I am a financial advisor who’s required to have errors and omission coverage. What do I need to look for in an E&O insurance policy?

    A: Before we give you the answer, here’s a short introduction on E&O that may be helpful. Errors-and-omissions insurance, or E&O, is an important business expense for financial professionals such as financial advisors, CPAs, and life insurance agents. In our litigious society, where responsibility is consistently pushed onto another party, one in seven of these professionals will face a lawsuit . Fortunately, most financial professionals are ethical and responsible and take great care managing the details of their work. With proper focus, advisors can avoid a potential lawsuit. However, even the most careful are not immune to a legal attack from a former or current client. Without the benefit of errors-and-omissions insurance, a lawsuit can be financially devastating.
    What You Need to Look for in an E&O Policy
    Not all E&O policies are the same. And depending on your specialty, there are certain elements you may need that others do not. Here are some of the features you should look for in a high-quality E&O policy:
    Adequate liability coverage
    All E&O policies include liability coverage that protects you from financial loss due to a lawsuit arising from your error or omission. Liability coverage has two parts: • Per Individual Claim – Usually, there is a limit per incident or claim. The typical individual limit is $1 million. This means that any single liability claim resulting from a lawsuit will pay no more than $1 million. • Aggregate – Each E&O policy has an annual aggregate that limits how much an insurance company will pay each year. The usual annual aggregate is $2 million. That means the insurance company will pay for multiple claims up to, but no more than, $2 million. Some insurance companies state a lifetime policy aggregate limit rather than an annual aggregate. Be sure the lifetime limit is adequate if you go this route. Remember, a general liability policy only covers incidents that affect bodily injury due to negligence from property or product safety. It does not cover financial loss to clients. Be sure to get adequate professional liability coverage from a high-quality E&O policy.
    Legal and court costs
    Whenever you are served legal papers that name you in a lawsuit, it will cost money just to defend yourself. Legal fees and potential court costs add up quickly and can turn even a small claim into a giant financial burden when you consider the total court and legal fees involved.

    Look for this important provision in your E&O policy to shield you from these damaging expenses. Most financial professionals have employees or staff who serve clients directly. When they make a mistake or fail to carry out a required task, you will be held accountable. Employee or administrative coverage protects you from employee E&O risk.
    Post-retirement claims coverage
    E&O claims do not always arise while you are in business. They may surface years later after you’ve retired and a past client files suit against you. Your E&O insurance policy should have a provision to cover any claims that occur post retirement. This assures you will not be exposed to great financial risk after you stop working.
    Employee or administrative coverage
    Most financial professionals have employees or staff who serve clients directly. When they make a mistake or fail to carry out a required task, you will be held accountable. Employee or administrative coverage protects you from employee E&O risk.
    Coverage extension to spouses, domestic partners, legal representatives, or beneficiaries
    Nobody wants to have their family or other loved ones affected by a lawsuit. Some cases may name spouses as an actual defendant, even though they had nothing to do with the main financial professional’s business. Protect your loved ones with this important coverage feature. Brought to you by the National Ethics Association, sponsor of Preferred Risk E&O insurance for qualified financial professionals.  ]]>     http://www.eoforless.com/uncategorized/how-important-is-selling-suitable-products-and-what-suggestions-do-you-have-for-doing-so-2/feed/ 0