Keeping Your Business Safe with E&O Insurance

As a new insurance agent, you’ve decided to enter a highly rewarding industry, both financially and psychologically. However, to attain these rewards requires a huge investment of time, energy, and fortitude. Because these sacrifices can be intense, you might have difficulty managing the three key challenges facing new insurance professionals:

  • Managing the risks of entering the business,
  • Making the most of your limited time, and
  • Building the goodwill of your prospects and clients.

Fortunately, buying (and keeping) E&O insurance will help you surmount each challenge. Here’s how.

First, new agents will typically have fewer assets and less disposable income than more experienced agents. As you’re working hard to adjust to a new industry—learning about its products and under intense pressure to close sales—the chances of making a mistake can be huge. This poses a large financial risk.

Since you have fewer financial resources and less knowledge, it’s crucial you protect yourself with E&O insurance. Going without coverage is an unwise choice for most agents. And those who have made and lost that bet rue the day they stayed uninsured. However, E&O insurance for new agents must also be affordable, since they don’t have a lot of money. “I need cheap E&O insurance” is a phrase heard often around new-agent offices. Online E&O providers address that need because they have less overhead than traditional E&O insurance marketers, which translates into lower prices.

Second, having limited time is a common problem for new agents. Why? Because becoming a successful producer forces you to quickly learn a great deal of information: product specifications, marketing and sales systems, new-business procedures, regulatory compliance, market and buyer needs, and much more. And while you’re learning all that, you must also identify prospects, set up meetings, do needs analyses, determine and present solutions, and close cases, not to mention handling service requests from existing clients.

For these reasons, new agents tend to be quite busy, which makes it hard to shop conventionally for E&O insurance through an insurance broker, a tedious and time-consuming experience at best. Given these problems, many new agents choose to buy E&O insurance from an online provider such as EOforLess. This lets them select, pay for, and then bind their E&O insurance in just a few minutes . . . literally saving days or weeks compared with a broker-mediated sale.

Third, because new agents are in an inherently risky position and are short of time, the last thing they need is a client dispute. Responding to client complaints and defending themselves in court is a huge time drain, something they can ill afford at this point in their careers.

Fortunately, having E&O insurance is a powerful way to prevent client problems. As soon as you suspect a customer is unhappy with something you did or failed to do, call your E&O insurer. The company will then evaluate the problem; appoint a defense attorney, if needed; and contact the unhappy customer to see if it can defuse the dispute before it becomes a formal lawsuit. If you don’t have E&O insurance, you’d have to handle these steps yourself, which might not happen. By not having E&O insurance, you actually increase your chances of getting sued.

In summary, as a new agent, job one is to get up to speed quickly with your job and your industry: learning the business, mastering your product portfolio, learning how to sell, and knowing how to get policies on the books and customer service requests fulfilled. It’s hard to do all that without the peace of mind that E&O insurance brings.

So, if you’re a new agent who still hasn’t purchased E&O insurance, consider buying from EOforLess, the online click-and-bind pioneer. And if you already have coverage, take advantage of our Renewal Reminder, which will prompt you to visit our online store before your existing policy renews. Either way, you’ll be doing your career a big favor by reducing the risks, costs, and problems all new agents face. Good luck!

Documentation—the practice of summarizing every key client conversation and decision in writing—is a crucial part of your day. It not only produces a paper (or electronic) trail of your regulatory compliance, it helps to support your legal defense in case a cl­ient sues you.  For these reasons, compliance officers and attorneys are big on documentation. In fact, they would love for you to spend your entire day on it, despite the inevitable revenue plunge.

However, insurance and financial advisors may not be as positive about documentation as their compliance and legal colleagues are. That’s because they’re the ones who have to do it. What’s more, each minute spent documenting imposes an opportunity cost in terms of time lost to prospecting, sales meetings, business management, and the like. As regulations become more involved, the documentation requirements soar in tandem, taking up more time, imposing more costs, and generally making the life of a financial professional more tedious.

Are you spending more time on documentation these days? Do you find yourself dreading every client phone call because now you have to record its key outcomes? If so, you’ll be happy to know you’re not alone.  According to a new survey from Nuance, maker of Dragon speech recognition software, 89 percent of financial advisors say heavy documentation limits the time they can spend with clients; 37 percent spend three hours or more each day writing financial plans, regulatory filings, or other documentation; and 48 percent say they have to generate at least one full page of notes after every client interaction. Is it any wonder documenting may not be your favorite activity?

Fortunately, taking and storing notes isn’t as hard as it used to be. Today, you have customer relationship management (CRM) applications to help with the generation, filing, and retrieval of meeting notes. In fact, according to Nuance, more than two-thirds of the financial advisors it surveyed use CRM software. However, the majority are less than satisfied with their CRM application, saying it’s frustrating and difficult to use.

In response, financial-services firms give their advisors a host of additional documentation tools, including standardized templates, disclosure forms, and the like. They also deploy smartphones and mobile apps to help advisors and agents complete their documentation tasks while on the road. This is important because making notes right after a meeting instead of when you return to the office minimizes forgetting.

Still, according to Nuance, 78 percent of advisors surveyed said they would be open to using additional tools such as speech recognition to make their documentation lives easier.

So what’s the bottom line? That documentation is a pain, but it’s also crucial. Which means you should make full use of all the tools at your disposal—your company’s CRM software, mobile note-taking apps, and speech recognition technology (if available)— to take the best notes possible. As a refresher, here are some of the items you should record:

  • The “Who”: customer name and title; personnel tasked with action.
  • The “What”: the specific prospect/client inquiry/decision that prompted the action, including accountabilities.
  • The “Why”: the reason(s) the prospect/client initiated the request.
  • The “When”: the time at which the request was made and completed.
  • The Need: the specific issues your fact-finding meeting uncovered; the needs the client specifically expressed.
  • The Recommendation: the recommendations your research and analysis produced?
  • The Decisions: whether the client decided to buy or not. If the latter, why.
  • The Questions: the questions/concerns discussed and the outcomes agreed to.
  • The e-mail/fax communications: the electronic or faxed communications that took place between you and the client.
  • The “moments of truth” in the client relationship: differences of opinion between advisor and client or between client and family members; new issues arising during annual update meetings; coverage change requests; carrier underwriting decisions, especially if negative.
  • The policy illustrations: the projections used to illustrate policy performance, including the client’s signature.
  • The unusual: atypical client situations or requests, including anything that seems weird or that suggests potential future problems.
  • The arguments or complaints: any negative interactions with a prospect or client, especially those relating to a breached duty (perceived or real).

Finally, if documenting all of the above is stressing you out, remember this: if you’re ever sued, your E&O insurance defense will only be as strong as the thoroughness of your notes. Good luck!


For information on affordable E&O insurance for low-risk insurance agents, financial advisors, and real estate broker/owners, please visit EOforLess.com. For information on ethical sales practices, please visit the National Ethics Association’s Ethics Center.

“Actions speak louder than words,” goes the old saying. This is especially true in life insurance, where agents who deliver on their promises outpace those who breach them. One especially important action is purchasing E&O insurance for your business. This doesn’t just protect your finances against client lawsuits; it sends a powerful message to your customers that you are a responsible financial professional . . . one who will make them whole should you ever make a mistake.

For this reason, buying E&O insurance is likely the most powerful method available for building client trust. Why? Because it sends your clients five compelling messages:

  1. That you have a fiduciary mindset. Even if you are not legally required to uphold a fiduciary standard of care, buying E&O insurance shows you have a fiduciary attitude. It conveys the message that you care about your clients’ financial well-being and will do your best to preserve and enhance it.
  2. That you believe in the value of risk assessment  and mitigation. In other words, when you buy E&O insurance, you model for your clients the same steps you’d like them to take . . . assess risks, identify key exposures, and transfer those exposures to an insurance company in exchange for paying premiums. When you buy E&O insurance, you encourage clients to purchase the insurance they need to keep them and their families safe.
  3. That you believe in being a responsible life insurance agent . . . willing to own up to and remediate your mistakes. E&O insurance is a cost-effective way to make clients whole after you make a costly mistake. Knowing that you have this protection in place will be a tremendous comfort to your customers. And they will respect you for it.
  4. That you are in this for the long haul. Having E&O insurance tells people you intend to stay in business for years. Since your policy serves as a financial backstop in case you lose in court, you won’t have to liquidate personal assets or shutter your business to cover a legal judgment. Clients will appreciate your financial resilience and longevity.
  5. That you will focus 100 percent on their needs because you won’t always be worried about making mistakes or getting sued. In short, having E&O insurance liberates you to do your best work for your clients; constantly second-guessing your actions and worrying about your legal exposures will be things of the past.

For all of the above reasons, it makes great sense for you to buy E&O insurance and to keep your policy in force at all times.  It’s an excellent way to demonstrate your long-term commitment to your clients, in good times and in bad.

If you’re ready to begin sending these messages to your clients, take the next step and visit EOforLess, an online provider of affordable E&O insurance. There you’ll find options for protecting your business and a user-friendly shopping portal that will bind the coverage you need in just a few minutes.

So don’t wait any longer. Build client trust by getting E&O insurance today!

Are you a life, health, or property-casualty insurance agent? Do you do investment or financial planning for a fee? Then you know all of these fields can be excellent ways to make a living—both financially and psychologically. But you also know they can be risky. Sometimes insurance or financial professionals do something wrong or fail to do something important. Other times, a client may create a dispute in an attempt to make money or hurt their advisor. In either scenario, getting embroiled in a court battle can turn a satisfying career into a stressful nightmare. And if you lose your case, it can have a devastating impact on your finances.

Enter e and o insurance, otherwise known as E&O coverage or professional liability insurance. With E and O insurance, you can convert a large, unknown, potentially damaging financial loss (a court judgment or settlement) into a known, easily affordable and budgetable expense (E&O insurance premiums). By transferring your risk, you not only will protect your business, but also secure peace of mind. For these reasons, thousands of insurance and investment professionals today buy E&O insurance in order to establish a financial backstop in case they lose a client lawsuit.  Are you among them?

If so, read on for a quick refresher on what E&O coverage is and how it works. If not, consider whether having this form of insurance would benefit you in the event a client decides to take legal action against you . . . and wins.

So what is E&O insurance? It’s simply an agreement between an insurance or investment professional and an insurance company in which the insurer assumes a professional’s liability risks in exchange for receiving a single or periodic premium payment. The purpose of the contract is to generate cash in case a court finds that the professional harmed a customer and must be held financially accountable.

What are the terms of the deal between you and your insurer? The easy answer is that your E&O policy will cover you in the event you make a mistake or neglect to do something that results in a financial loss to a client. The harder answer involves drilling down further and examining the policy’s insuring clause and list of exclusions. Although the latter discussion is beyond the scope of this article, we recommend you carefully read those sections of your policy to see how they define terms such as “insured,” “loss,” “claim,” “wrongful act,” and “professional services” and what losses they will not cover. There are nuances involved in how insurers define these terms. So you want to be sure their contract language syncs with your needs. If not, you may not be protected in the event you get sued in the future.

However, if you operate within the policy’s insuring clause and exclusion list, then you will be fully protected against future lawsuits up to your policy’s limit of liability (example: $1 million). This assumes you pay your premium when it comes due. In the unfortunate case a client sues you, your insurer will then do the following on your behalf:

  • Provide you with an attorney at no additional cost.
  • Assign a company adjuster to investigate and process your claim.
  • Pay your attorney’s retainer fee and additional fees incurred while handling your case.
  • Pay for expert witnesses your attorney deems necessary.
  • Cover arbitration or mediation costs.
  • Pay for any court-related expenses.

For your E&O coverage to work as planned, you must uphold your end of the bargain. This involves paying for your E and O insurance premium on time, never letting your policy lapse, and notifying your insurer promptly at the first sign that a client may file a complaint or lawsuit against you.

Avoiding a lapse is doubly important if you purchased a claims-made E and O insurance policy. That’s because under the terms of a such a policy, the insurer will provide protection for any client dispute or lawsuit that arises and is reported during the policy period. This is true even if the claim resulted from an event that happened many years ago when you had E&O insurance with another company. (Claims-made policies are distinct from occurrence E&O policies. With those, the E&O insurance policy in force when the precipitating incident happened pays the claim, not the one in force when the claim is filed.)

However, there’s an important caveat: You must have maintained continuous E&O coverage over the years. If you canceled your policy, creating a coverage gap, your current claims-made policy will not cover events that occurred prior to the gap.  So if you take nothing else away from this article, let it be this: don’t lapse your E&O insurance policy. Even if you replace it months or years later, you will now have a coverage gap to deal with. This may have dire consequences for your finances if a lawsuit arises from the gap many years from now.

Once you understand how E&O insurance works, the next question is determining from whom to buy it. If you have a large agency and many agents and service staff working for you, or if you engage in complex, risky transactions, you might want to work with an experienced E&O insurance broker. This person will shop your case to multiple markets and return with several insurance quotes for you to consider. Once you select one, you will likely have to submit an insurance application and then wait for days or weeks until the insurer gets back to you with its decision.

Alternatively, if you are a solopreneur and don’t sell risky products (or do risky transactions), you may want to purchase your E&O insurance online from a firm such as EOforLess.com. A pioneer in online insurance sales, EOforLess provides E and O insurance protection for life, health, and property-casualty insurance agents, as well as for registered investment advisors. How to buy from us? You simply visit our website, select the appropriate policy for your license type, complete an application, and provide payment information. You can then bind your coverage and print out proof of insurance within just a few minutes. As a bonus, you will also be enrolled in the National Ethics Association, which provides ancillary benefits such as product discounts and free CE courses. NEA also hosts an online Ethics Center, where you can learn how to protect your firm by adhering to ethical and compliant business practices.

The bottom-line point is this: to sell insurance or investments in today’s litigious world, sensible professionals do business defensively in order to avoid potential E and O insurance claims. Part of this involves developing an ethics policy for your firm and following all pertinent compliance regulations. The other part involves making sure a successful client lawsuit won’t bankrupt you. How? By purchasing comprehensive and affordable E&O insurance. If you’d like to check out your options, please contact EOforLess today.