The risks of errors & omissions are real. Despite the human tendency of assuming that bad things always happen to other people, the chance of an unhappy client suing you is high. And the fallout of losing in court can range from paying a minor five-figure judgment to cleaning out your life’s savings. The point is this:  if you’re serious about building a business with long-term value, don’t let errors & omissions bankrupt you.

The solution isn’t hard to see: buy a high quality, affordable E&O insurance policy to transfer your risk to an insurance company. Doing this also converts a potentially large and unknown cost to one that is predictable and manageable: monthly, quarterly, or annual E&O insurance premiums.

Now, as with all forms of insurance, the devil is in the details. Spend the time to consider your options. Look at various insurance company offerings, focusing on their insuring clauses and exclusion lists. You also want to select a policy that works for your type of business and license type and that offers liability limits sufficient to cover potential payouts to your largest clients.

Buy E&O Insurance Online

And don’t forget to do your due diligence regarding all the entities involved. In the group or affinity marketplace, these typically include:

  • A sponsoring association,
  • An E&O insurance marketing firm/website,
  • An insurance third-party administrator, and
  • An insurance company.

If you’re considering buying group E&O insurance coverage, first take a look at the sponsoring organization. Many financial-professional trade associations offer E&O insurance for an extra fee as an ancillary membership benefit. Here, you want to make sure the association understands the needs of its members and has selected insurance partners who know what they’re doing. You also want an association with staying power; if it folds after you join and buy insurance—and your E&O coverage isn’t portable—you may be left with an E&O coverage gap. This can lead to problems if you suffer a loss during this period and your future E&O insurance refuses to cover your claim. National Ethics Association, sponsor of EOforLess, has a long track record of offering E&O insurance, launching its first product for life insurance agents in 2008.

Sponsoring organizations often partner with marketing entities to spread awareness of their plans and encourage prospective buyers to sign up. The National Ethics Association’s marketing resource is EOforLess, which provides an online shopping platform called EOforLess.com. A big consideration: make sure the marketing entity makes it quick and easy to shop for insurance. It should let you compare various options and then conveniently apply and pay for your coverage online. At EOforLess.com, most financial professionals can select a policy, bind, and print their certificate of coverage in just a few minutes.

Working in tandem with the sponsor and marketing firm, insurance third-party administrators (TPAs) handle the backroom functions of enrollment, billing, and customer service. It’s generally preferable to have a sponsor farm out administration to a highly capable specialist rather than attempt to do it in-house. That’s because a TPA will work with multiple sponsors and buyer pools, which gives it the scale to build or buy appropriate technology. It also give it the ability to house a large team of experienced customer-service representatives.  Most trade associations find it difficult to handle both of these functions internally, while still providing their core member benefits.

Clearly, since the insurance company is the entity that assumes your risk and is responsible for paying your E&O claim, focus most of your research on it.

  • Consider its A.M. Best rating as well those from other ratings agencies. Make sure the company falls within the top one or two grades, which indicates it will have the long-term solvency to stand behind its policies.
  • Check out its track record in the E&O marketplace. Is it an established player or a newcomer?
  • Determine if its E&O premiums have remained stable or whether it buys market share with low premiums, then increases them later?
  • See if it understands the risks of your specific profession and knows how to price for that risk?

Finally, solicit the opinions of other financial professionals who may have dealt with the firm in the past. Post queries on social-media communities such as Facebook, LinkedIn, and Insurance Forum to see whether people are satisfied with the firm’s customer service, especially with how it handles claims paying.

Bottom line? E&O insurance is your best protection against unforeseen disasters. But don’t buy coverage from just any association and marketing firm. Also, don’t assume that all third-party administrators and insurers are the same. Do your due diligence to buy the protection you really need at a price you can afford. We hope that after doing your homework, you’ll decide that the National Ethics Association and its marketing affiliate, EOforLess, are the firms for you. Good luck!

What is E&O Insurance and What Does It Deal With?

As providers of E&O insurance, EOforLess.com admires the time and effort financial professionals invest in their firms. We also admire their courage in going out on their own when the majority of people today opt for the security of working for someone else. And we really admire the confidence entrepreneurs have in their own abilities. They believe the future will be theirs, and in most cases, it will!

But in watching entrepreneurs launch new businesses for years, we also know they can be prone to hubris. They often bite off more than they can chew, while also believing nothing bad will ever happen to them. The first trait can lead financial professionals to make mistakes, and the second to foregoing E&O insurance. Together, they can spell big problems for entrepreneurs who get embroiled in client disputes.

If you think your company can do without E&O insurance, think again!

Now, don’t be offended by our plainspoken language. We are coming from a place of deep respect and admiration for the entrepreneurial spirit. We want you to succeed and fully expect you to. But we also realize there’s a chance you’ll commit an error or omission, which will generate a client financial loss. And if the mistake or omission is serious enough and the client is angry enough, there’s a chance you’ll get sued—and lose. So the question is, how much will you be on the hook for and where will you find the money?

Many financial professionals decide to either ignore the risks of doing business or to assume nothing bad will ever happen. Others will do the responsible thing and insure themselves against the potential negative consequences of getting sued. They buy E&O insurance so they can literally sleep well at night.

What does E&O insurance provide? It provides a promise of a financial backstop should you get sued. It generates funds to hire an attorney to defend you in court, as well as cash to cover any damages a judge may order paid to the plaintiff. Finally, it also will pay for court costs should you lose.

But the biggest thing E&O insurance provides is stress reduction in case a client brings an action against you. One of the first things financial professionals worry about is what attorney to hire to mount a defense. Sure, most towns have multiple attorneys available. But defending insurance agents, financial advisors, stock brokers, and real estate brokers/owners is a specialized discipline. Most communities won’t have a lawyer available with the expertise to handle your case. So what will you do then?

The other concern is to secure cash quickly to pay for your attorney’s retainer. Since lawyers often charge hundreds of dollars per hour, you can imagine that reserving a significant block of their time at hundreds of dollars per hour can produce an large retainer fee. With E&O insurance, you will not be personally responsible for paying this and future fees billed to your case.

Finally, should you elect to defend yourself against an E&O insurance claim, you would have to manage all interactions with the plaintiff’s attorney as well as with the judge. Since you also have your regular job duties to handle, defending yourself can quickly produce a time crunch, leading you to neglect your business duties. Less time working your normal job means less money in your pocket . . . at a time when you need more for legal expenses.

Errors & Omissions Are Inevitable, but the Responsibility Is Yours

Here’s the bottom line: errors & omissions are inevitable, but the responsibility is yours. By “responsibility” we mean ethical financial professionals must be accountable for their actions. If they make a mistake, they need to own up to the problem they caused and reimburse their aggrieved client for their losses. If they’re falsely accused of an error, they owe it to themselves to mount an aggressive defense so the client doesn’t benefit financially from a false or nuisance claim. By having E&O insurance, professionals assure they can follow each scenario through to its logical conclusion so that justice is done. Without E&O insurance, the risk is high that financial disputes won’t be litigated and settled quickly and fairly, whoever is at fault.

Going without Errors & Omissions is a Faulty Idea

Hopefully, it’s clear that going without errors & omissions is a faulty idea. Solution? Find comprehensive, yet affordable E&O insurance protection designed specifically for your license type. Also, consider shopping for coverage at an online E&O marketplace such as EOforLess.com. This will allow you to find an appropriate policy with a minimum of time and effort. Here are some pointers to consider as you begin the process of buying E&O insurance online.

First, take a look at group insurance. These will likely be the most affordable E&O insurance plans because they’re inherently more efficient than individual policies.

Second, look for companies that offer streamlined E&O insurance underwriting. In other words, find firms that are willing to issue coverage based on your answers to a limited number of risk-assessment questions. Ideally, they should also consider your preferred-risk status when determining the premium they charge.

Third, think about buying online vs. buying through a traditional bricks-and-mortar insurance agency. The difference? The former will be quicker and less involved from a process standpoint; the latter more complicated and time consuming. However, for a financial professional with sub-agents or advisors, it may be necessary to deal with a broker. Just budget extra time for filling out a complicated insurance application and for the broker to shop your applications at a number of different insurers before returning with multiple quotations for your review.

In short, don’t sweep your E&O liabilities under the rug. Own up to them as a responsible, forward-thinking entrepreneur. If you’re as good as we think you are, then chances are nothing bad will happen. But in the unlikely event you get sued, you’ll know your business and assets will be well protected. Regardless of a court’s judgment, you will be able to keep doing what you love most—running your own show and reaping the rewards for doing it!

The Best Way to Protect Yourself from Customer Complaints

Are you so busy adding new clients and serving existing ones that you never learned about the ways E&O insurance can benefit your business? We thought so. But don’t worry. It’s never too late to protect yourself with high-quality and affordable E&O insurance.

Now, we understand that for some financial professionals, this is a counter-intuitive statement. That’s because they believe their risk of getting sued is quite small. Plus, they also assume if they do get sued, they’ll be able to resolve the matter amicably by making a financial settlement with their aggrieved client. We’re here to tell you those two assumptions are false, and that believing in them can potentially destroy your business.

First, every year, tens of thousands of financial-services clients sue their advisors.  Many times the advisors deserved to get sued because they made a serious mistake. Of course, a significant percentage of lawsuits fall into the nuisance category. They come from individuals with unrealistic expectations of how financial products work or who are looking to score a quick payday at their advisor’s expense. Therefore, even though your risk of getting sued is quite low, you can still get sued. And if you do and have no E&O insurance in force, your business will be in jeopardy.

Second, financial advisors clearly are talented and know a lot about their products, financial markets, and the needs of their customers. But what they may not understand are the nuances of human nature; they may not fully grasp the depth of a client’s anger over a real or imagined problem. And angry clients are prone to hauling their advisors into court—and unlikely to settle without a large cash incentive.

How to best protect yourself against customer complaints?

Start by having a process in place for responding to customer complaints. Your insurance FMO or securities broker-dealer likely has a procedure to follow. Familiarize yourself with this process and adhere to it carefully once a client’s intentions become known.

If your FMO or BD lacks such procedures, then develop your own. Key elements should include:

  • Ceasing communications with the client until you find an attorney to speak on your behalf. If you have E&O insurance, your insurance company will provide you with a capable lawyer at no cost to you.
  • Collecting all relevant documents pertaining to the matter under dispute.
  • Developing a written account of the conflict, based on input from all individuals in your firm who dealt with the client.
  • Not mentioning you have E&O insurance.
  • Not offering money to make the problem go away.
  • Filing a notice of claim with your E&O insurance company. If you don’t have an E&O insurer, then you’ll have to find and pay for your own attorney.

However, complaint prevention will always be the most powerful protection technique for your business. Do this by:

  • Always being properly licensed for every product you sell.
  • Knowing the features and benefits of your offerings in great detail and sharing this expertise with your customers during the sales process.
  • Setting proper expectations with clients regarding product results during various market conditions.
  • Having a strong on-boarding process so clients have realistic notions of the services you provide after the sale.
  • Having multiple methods available for clients to contact you, especially during times of market volatility.
  • Being perceptive to changes in client behavior resulting from a perceived error or omission on your part.
  • Responding quickly to signs of client discontent to make sure you understand what went wrong and to quickly make things right.

By adopting these measures, you will effectively mitigate your risks of getting sued. But the best protective strategy of all is to have a high-quality E&O insurance policy in force.

What is E&O Insurance and How Can It Benefit Your Business?

E&O insurance is similar to many other forms of insurance. It protects you against the negative impact of a financial loss. In this case, it provides money to pay for an attorney as well as to make good on any legal judgment against you should you lose your case in court. E&O policies have ancillary benefits that make them even more advantageous to financial professionals. However, these two core features of cash to pay for legal advice and money to discharge a legal judgment are the most important benefits of E&O insurance.

The benefits of having E&O protection are plain to see:

  • With E&O insurance in force, you eliminate financial uncertainty from your business and your life. When you buy a policy, you essentially trade a large, unknown financial risk—the chance of getting sued and the resulting cash payments—with a predictable recurring expense (your E&O insurance premium). Most financial professionals agree that replacing a large unknown risk with a fixed, ongoing expense makes a lot of sense.
  • You also get help managing the process of resolving a legal dispute—from an insurer-provided attorney and claims adjuster. Without the help of these two individuals, you would have to manage the process entirely by yourself, which makes it hard to keep working in and on your business.
  • Eliminating uncertainty and getting help during a crisis greatly reduces the stress and worry of dealing with unhappy clients. Why manage such situations by yourself when you can call on your E&O insurer for assistance?
  • Finally and most importantly, the key benefit of having E&O insurance is that a large legal judgment won’t put you out of business. As long as you have sufficient limits in your policy, your E&O insurer will pay for any legal judgments, damages, and court costs resulting from your loss in court.

Errors & Omissions Insurance is Designed to Protect Your Bottom Line

At the end of the day, errors & omissions insurance is designed to protect your bottom line. It makes sure your business can continue operating during a legal crisis—bringing in new clients and revenue—rather than scaling or shutting down. If you need income from your business to pay for current expenses and to help you save for the future, then self-insuring against E&O claims is a risky strategy, indeed.

In summary, your bottom line is what’s at stake. If you take proper steps to protect it now with E&O insurance, you will be ready for any future contingency. Doesn’t it make sense to not only grow your firm’s financial resources when times are good, but also to protect them against potential external attacks? Of course, it does!

If you already have E&O insurance, take a look at your policy now to make sure it still meets your needs. If it doesn’t, take steps now to secure coverage from a reputable E&O insurer. To speed the process of getting insured, consider selecting an online provider such as EOforLess.com. Using our user friendly website, you will be able to shop, apply, and pay for your policy, as well as print out your proof of insurance, in just a few minutes. What are you waiting for?

What a Policy of Errors & Omissions Can Do for You

As with all forms of insurance, E&O insurance can be hard to understand. And that’s under the best of circumstances when a business owner has plenty of time to learn about this essential coverage. So what do so many business misunderstand about E&O insurance?

For one thing, they assume it’s a “nice-to-have” type of insurance, assuming there are discretionary funds available. But since many solo financial professionals or those who run boutique operations only have slim margins over expenses, E&O insurance is viewed as a luxury. However, protecting yourself against E&O claims can literally spell the difference between your business surviving a major lawsuit and crumbling in the face of an insurmountable judgment.

For another thing, businesses view client lawsuits as something that happens to other firms. You know, to the ones that never established a desired client profile or that skimped on customer service in order to maximize profits. Not true. E&O claims happen even to firms that add new clients with care or who invest heavily in customer service. That’s because no matter how capable they are at customer service, employees are human and prone to making mistakes.

Finally, financial professionals assume that clients are more likely to bring suit against larger firms, viewing them as having more resources with which to settle a lawsuit. Again, this is a misperception. In fact, according to a study conducted by the U.S. Chamber Institute for Legal Reform, small firms shouldered the vast majority of tort liability costs ($105.4 billion in 2008), even though they represented only 22 percent of all business revenue. Presumably, large firms with extensive legal support are better equipped at making frivolous lawsuits “go away.”

Here’s our point: If you’re serious about succeeding in business, don’t fall prey to common misunderstandings about E&O insurance. Accept that it’s a crucial form of insurance protection, which nearly every small business needs in today’s litigious environment.

Do you understand what a policy of errors & omissions can do for you? If not, read on.

Boiled down to its core essence, E&O insurance makes your firm whole in the event it loses a client lawsuit and a judge hands down a large legal judgment against you. In this event, E&O insurance provides funds to retain an attorney to defend you and to indemnify the plaintiff should you lose in court.  It also pays for court costs as well as the expense of retaining an expert witness to testify on your behalf. But the essential features of cash to pay for legal advice and money to discharge a legal judgment are what you really need to know about E&O insurance. Without those two benefits, many financial professionals are unable to emerge intact from a legal battle they fight hard to win, but lose.

E&O Insurance Is Not Commercial General Liability Insurance

Financial professionals often assume that purchasing a commercial general liability (CGL) policy will cover their E&O losses also. Unfortunately, CGL policies are not designed to protect firms against E&O problems. For example, CGL insurance will not pay benefits if your error or omission causes a customer to lose money. It will only pay when your mistake produces property damage or bodily injury to your buyers or to a customer of your customer.

There are a number of other differences between CGL policies and E&O insurance. Suffice it to say, if you’re involved in the sale and delivery of financial services, it’s important to have both CGL insurance and E&O insurance to have comprehensive protection —as well as full peace of mind.

Your Best Defense against Lawsuits, Damages, and Counterfeit Claims

In short, your best defense against lawsuits, damages, and other business claims is to do business ethically, legally, and with a commitment to quality in every facet of your business. However, as we mentioned earlier, mistakes do happen. So it’s also important to defend yourself against lawsuits by purchasing a high quality, affordable E&O insurance policy that will provide funds to pay for legal judgments and settlements that otherwise might bankrupt your firm.

The bottom line? Would you drive your car without auto insurance? Raise a family without insuring their medical expenses? Buy a house without insuring it against fire and theft? Of course not! So why would you operate a business without protecting it against the threat of getting sued?

Do the wise thing and protect your business against E&O claims today. And if you’re pressed for time, considering purchasing E&O insurance from an online provider such as EOforLess.com. By visiting our user-friendly site, you will be able to select, apply for, and print out your proof of coverage in short order. It’s yet another reason to do the right thing for your business before it’s too late.