Business Safety Net: How E&O Insurance Protects You When You Fall

Just as circus aerialists have safety nets to catch them when they fall, financial professionals in insurance, investments, and real estate buy E&O insurance to protect themselves against client lawsuits. They, like highly skilled trapeze artists, have worked hard for years to hone their skills. Yet they realize even they can make a mistake—can fall off the high wire, if you will—and hurt themselves and their companies financially. What about you? Do you have a business safety net in place to protect you if a client comes after your assets?

If not, it’s important to consider why not. Are you assuming you’re perfect and will never make a mistake? Then think again because the ranks of bankrupt financial professionals are filled with those who thought they were perfect. And perhaps they were . . . until their negligence harmed a client who then sought to recover their losses in court.

Perhaps you believe you can self-insure the costs of future E&O insurance claims. And maybe you’ll easily make good on a typical annuity-related claim of about $20,000 or one relating to group life insurance coverage of roughly $10,000 (according to a major E&O insurer’s claim study). But what if you lose a case relating to pension coverage (average claim cost: $71,000) or to disability insurance ($149,000)? Will you be able to pay for those judgments out of your personal assets? And what about outlying claims worth $500,000 or more. Would you have enough liquid assets to cover such a large payment?

Or perhaps you discount getting sued because your clients like you and have never sued you in the past. That may well be true . . . until the day one begins to harbor a grudge against you through no fault of yours. If that person files a nuisance lawsuit against you, will you have the time, energy, and expertise to dispense with it?

In all these scenarios, the typical excuses for not having E&O insurance don’t hold water. In short, if you’re doing business in the fields of insurance, investments, or real estate, your risk of getting sued is considerable. And the odds you’ll lose such a lawsuit and suffer a large judgment are also considerable. So perhaps it’s time to ask yourself a hard question: Are you equipped to weather the financial impact of losing a large E&O case? If not, what should you do?

The answer is clear: transfer your liability exposure to an insurance company by purchasing comprehensive and affordable E&O insurance. By moving your risk to an insurer in return for paying periodic E&O insurance premiums, you substitute unknown risks for predictable outcomes. Most financial professionals find this to be a trade well worth making. Here’s why.

  • First, as we just mentioned, buying E&O insurance reduces your financial uncertainty. This means you’ll be able to focus on moving your business forward without having to always worry that your next client will be the one to sue you.
  • Second, when you have E&O insurance, you’ll have quick and ready access to a vetted defense attorney. Instead of having to rush around to identify candidate attorneys and then select a capable one—which is not an easy task even in the best of times—you’ll have one assigned to your claim within a few days. This means you can focus on your defense immediately instead of spinning your wheels.
  • Third, having E&O insurance is a huge stress reliever. When you don’t have to worry about a large lawsuit putting you out of business in the future, you can focus on doing good work in the present. Who knew sleeping well at night could be so enjoyable?
  • Fourth, being insured means you never have to worry about being saddled with a legal judgment that could potentially force you into bankruptcy. Every year, thousands of financial professionals wind up broke and bankrupt because they lost a big lawsuit and lacked the means to pay a judgment. Had they purchased E&O insurance, their insurer not only would have paid the claims on their behalf, they would have also covered their attorney fees, court costs, expert witness fees, arbitration/mediation costs, and all costs related to the settlement process. If through a miracle these defendants were granted a do-over, do you doubt for a minute they’d buy E&O insurance as quickly as possible?
  • Fifth and finally, when you buy E&O insurance you essentially are telling your clients you have their best interests at heart. That’s because having E&O insurance conveys to them that you are a true financial professional who is committed to making amends should you ever make a mistake that harms them. There is no one action that builds client trust as quickly this.

In conclusion, if you are currently running your business without a safety net, consider the benefits of protecting yourself with affordable, high-quality E&O insurance from This can be the difference between you surviving a lawsuit and moving ahead with your business or you losing your assets and livelihood in one fell swoop. We hope we’ve convinced you that the former is a much better alternative. Good luck!

Is E&O Insurance a Good Investment for Business Owners?

If you own a small business, you probably are involved in a number of its functions: marketing, sales, operations, finance, technology . . . the list goes on. However, your most important job activity is likely to be management—the function that handles the planning and allocation of resources. If you think about it, is there anything more important than charting the path forward for your business and then assigning the resources necessary to achieve its goals?

When you’re wearing your management hat, the key question is, “Should I allocate $x here or would it generate a better return by investing the money there? This pivotal question also relates to risk management and the purchase of insurance, including E&O insurance. That’s because deciding to buy E&O insurance will consume resources that could be used elsewhere in the firm. So you want to be certain you are making a wise resource allocation for E&O insurance vs. for using the money to buy something else your firm needs.

Investing in E&O insurance isn’t like purchasing a financial asset such as stocks and bonds. That’s because it doesn’t appreciate in value as its price increases or generates higher dividends when it’s profitability grows. Instead, it protects you against the financial costs of getting sued and losing your case. In case that happens, your E&O insurance will provide cash to pay for any court judgments, expert witness fees, and court costs. It will also provide funds to pay for an attorney, who will quarterback your defense.

Is this a good “investment”? Well, if you lack sufficient cash and other resources to pay for the above items, it may well be the best investment you ever made! But covering the hard-dollar costs of losing an E&O lawsuit is just one feature of your E&O purchase. There are a number soft-dollar or intangible benefits for buying E&O insurance, as well. Here are just four of the most important ones:

  1. First, when you purchase E&O insurance, you are trading your cash for enhanced financial security. For a reasonable quarterly or monthly outlay, you will be secure in the knowledge that if you lose a court battle, your insurer will pick up the tab. This means you won’t have to liquidate all your assets or declare bankruptcy in order to make good on a court judgment. Most life insurance agents, property-casualty agents, or registered investment advisors would consider that to be a very good investment, indeed.
  2. Second, when you purchase E&O insurance, you, in effect, pre-pay access to a vetted E&O insurance attorney who can jump into your case with no up-front due diligence on your part. The benefit of being able to quickly gain access to a trusted attorney cannot be overstated. At a moment of high stress, it’s extremely comforting to know you won’t have to screen and hire your own attorney. Your insurer-appointed lawyer will get on your case immediately.
  3. Third, reducing uncertainty and getting rapid legal help will greatly lower the inevitable stress and anxiety that comes from getting sued. If you’re like most financial professionals, you likely will be stunned to hear that a client is bringing legal action against you. Once the news sinks in, you may begin to experience the symptoms that follow trauma: difficulty sleeping, excessive worrying, uncontrolled anger, and a desire to self-medicate, among others. Investing in E&O insurance helps to counteract these negative symptoms by reassuring you that you are not alone in this crisis. Your insurer-appointed attorney and claims adjuster will help you get through it. And if you lose your case, your insurer will help you to defray the financial aftermath.
  4. Finally, investing in E&O insurance means you will have complete protection against a lawsuit-generated personal bankruptcy. If you’ve ever seen a friend or family member go through this process, you know how disruptive and upsetting it can be. Buying E&O insurance means you will likely not have to resort to bankruptcy in order wipe your financial slate clean.

With a significant “return on investment” from buying E&O insurance, it should be obvious by now that financial business owners need E&O insurance. It’s not a big investment in terms of cash outlay. But it’s a huge investment in terms of potential benefits to one’s business and personal security. And given this importance, it’s also crucial to make this purchase as quickly and efficiently as possible. This means purchasing it online through a firm such as rather than working with an offline broker, who will generally take days or weeks to complete the transaction. With EOforLess, you can shop, apply, and pay for your E&O coverage in just a few minutes online. And printing your coverage confirmation will take just a couple minutes more.

So stop wondering about whether E&O insurance is a good investment for business owners. Take our word for it; it may well be the most important purchase you’ll ever make for your business, for your family, and for you.

Life insurance agents and real estate agents have very different jobs. But one thing they share is the ability to shape their clients’ expectations in order to produce good outcomes. When customers hold beliefs that aren’t consistent with reality, they often are disappointed with the results their agents deliver. For some, disappointment may turn to fury, which can spark a dispute that ends up in court. E&O insurance coverage is tailor-made for this situation. But it’s better to avoid the dispute in the first place by setting the right client expectations during your initial meetings. Here are some tips for doing just that.

  • For starters, both life insurance agents and real estate agents can make their respective sales processes completely truth-driven. Agents who are selling life insurance or annuities should never promise a benefit that isn’t spelled out in the insurance contract. Meanwhile, real estate agents should never lead sellers to believe they can sell their property for more than local market conditions suggest or buyers to be able to purchase their dream home at substantially lower-than-market prices. Regardless of whether you’re a life or real estate agent, stretching the truth will always establish incorrect expectations that can spark problems later.
  • In addition, agents must use advertising and sales literature responsibly to set appropriate expectations in the minds of their prospects. Life agents should never use illustrations that violate the NAIC Life Insurance Illustration Model Regulation. Meanwhile, real estate agents should always obey their state’s real estate advertising and solicitation rules.
  • Also important is your full commitment to educating your prospects and clients about the details of your services. Life agents should work hard to educate prospects about any contractual element that might generate a financial penalty or extra cost in the future. Real estate agents must be explicit about what they will and won’t do for buyers and/or sellers during a transaction.  Then they must document those activities in a written agreement. Promising to do something you have no intention of doing will be a recipe for disaster in most real estate engagements.
  • Because life insurance agents sell highly complicated products, it’s crucial to define appropriate expectations about things like exclusions (what a policy won’t cover), the possibility of future premium increases, and the conditions under which a policy might lapse. Also crucial is explaining the importance of truthfully and completely answering all questions on the insurance application. Failing to do so can lead to insurers challenging or refusing to make good on future policyowner claims.
  • For their part, real estate agents owe their selling clients a full discussion of the status of the local real estate market and how that will likely affect how long their homes will take to close and at what price. Agents should then help their clients settle on a rational sales price that flows from hard data, not emotions. From the buyer perspective, agents should also help their customers establish appropriate expectations about how much home their budget will allow them to buy and how competitive the buying process will be. For example, a tight market means buyers may wish to avoid low-ball first bids, which may do more to annoy sellers than produce a successful transaction.

In short, by educating your prospects and clients, you will likely head off dashed expectations before they become a complaint or a lawsuit. Still, despite your best efforts, it’s likely that a few of your customers may become disgruntled and take you to court. If you have maintained your E&O insurance in force, you will have a framework in place for responding to the client and protecting your interests.

The first thing to do is to promptly file a claim with your E&O insurance company. It’s important to do this as soon as you suspect a client will file a complaint or lawsuit. This will cause the insurer to open a claim file on your behalf, to appoint an attorney to defend you, and to assign an internal claims adjuster to manage the process of resolving the dispute. During this process, it’s important to let your attorney and claims adjuster do their jobs without interference. Let them handle all conversations and correspondence with the plaintiff and follow their advice in terms of what to say and not say during legal proceedings. Also, be sure to share your entire customer/case file with them. This will help them fully understand what led to the dispute and decide how to best defend you.

With a competent attorney and claims professional in your corner, it’s likely any lawsuit against you will either be dismissed, settled out of court, or adjudicated in a legal proceeding in a reasonable time frame. If your documentation was good and you cooperated fully with your defense team, chances are the legal outcome will be satisfactory. And most importantly, if the court deemed you responsible for paying a judgment, your E&O insurance coverage will provide you with a financial backstop. Without insurance, the cost of losing can be significant, perhaps even forcing you to declare personal bankruptcy.

However, the good news is you can almost always prevent disputes by carefully setting expectations early in your customer relationships. Even a modest amount of discussion will go a long way toward defusing future problems. And any time you spend on client education will be preferable to time spent sitting in court. Right?

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!