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Benefits of E&O Insurance

The benefits of E&O insurance for life agents fall into two different buckets. The first relates to the mistakes life agents make in the course of doing their traditional work. These mistakes, which involve doing the wrong thing or simply failing to act when action was required, crop up in every facet of a life agent’s job, including . . .

  • Assessing needs for life insurance, annuities, and related products.
  • Analyzing and recommending appropriate solutions.
  • Determining appropriate benefit amounts.
  • Performing periodic needs assessments.
  • Handling client service requests such as updating beneficiary elections.
  • Assisting in the filing of life insurance death claims.

Given the scope of these activities, the risk of life agents making a mistake is huge, which is why savvy agents purchase E&O insurance as a financial backstop.

The second bucket relates to a whole new aspect of the life agent’s job—serving as a fiduciary to their clients.  With the enactment of the U.S. Department of Labor’s fiduciary standard in 2016, which becomes effective in April 2017, life agents will be regulated as fiduciary advisors when they help clients with their Individual Retirement Accounts or with other tax-qualified pension plans. This means that for the first time, failure to serve their clients’ best interests could expose agents to additional liability—and potentially damaging legal judgments—for failing to uphold their fiduciary duty.

Because of this enhanced standard of care, life agents will soon have a greater need for high-quality E&O insurance coverage in the face of a much higher risk of doing business. Fortunately, contemporary E&O insurance provides excellent protection against both the standard and emerging risks of selling life insurance and related products.

E&O insurance from entities such as EOforLess.com provide money to deal with the aftermath of getting sued. This includes generating funds to pay for defense counsel, to cover the cost of legal judgments and settlements, and to reimburse the court for its costs. Depending on the client dispute at issue, coming out on the losing end of an E&O legal battle can cost life agents hundreds of thousands of dollars or more. Dealing with this financial burden without the benefits of E&O insurance can literally kill a life agent’s business, while potentially leading to a devastating personal bankruptcy.

E&O for Life Agents

Another reason why E&O for life agents is so important is that their work often contains inherent E&O tripwires. Here are five of them:

  • First, life agents often find themselves dealing with big-money engagements. For example, affluent clients might buy life insurance with multi-million-dollar face amounts in order to fund the passing of their estates tax-free to their heirs. If something goes awry with this transaction, agents can count on the survivors calling their attorneys shortly.
  • Second, clients have deeply held attitudes about their money . . . a money personality, if you will. If an agent does something to reduce a client’s net worth, it might not only be a blow to someone’s finances, but also to his or her sense of identity and self-esteem. This may in part account for the anger and animosity that fuel many client/agent legal battles, which become much larger than a dispute over money.
  • Third, many life agents not only must work with their clients, but also with their clients’ children. Whenever agents deal with multi-generational families, they can find themselves embroiled in differences of opinion between family members or face a child’s fury that the agent somehow wronged their parent. This is not a pleasant experience for agents.
  • Fourth, the life insurance industry is changing rapidly from a regulatory, product, and technology perspective. Agents who fail to keep up with an evolving marketplace leave themselves open to making mistakes. The last thing clients want to hear is that they lost money because their agent recommended an outdated product or made projections using the wrong software version.
  • Fifth and finally, life insurance agencies are leaner than ever before. Most have reduced their supervisory ranks so that agents have less oversight than in the past. This means clients are often the first people to detect agent mistakes. Agencies have also reduced their support staffs, forcing life agents to do their own paper work, which can lead to sloppy errors.

So however you look at it, today’s life agents operate in an extraordinarily risky environment, based on their traditional job functions, as well as on their emerging fiduciary duty. When you factor in the tripwires just discussed, doing business without comprehensive E&O insurance production is not a sensible strategy for any life agent who wishes to build a sustainable business. This is why an increasing number of them are taking advantage of new ways to buy E&O insurance online, especially from EOforLess.com.

Built by life agents for life agents (and other types of financial professionals), EOforLess.com offers a quick and convenient way for agents to buy affordable E&O insurance . . . and to bind and print their policy within minutes. By eliminating the traditional hassles of shopping for E&O insurance, EOforLess.com has helped thousands of professionals to get insured who may have gone unprotected in the past. This is truly a win-win for all concerned.

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