The vast majority of life and health insurance agents are ethical, compliant with industry regulations, and have meticulous business practices. But even the best agents make mistakes, and when this happens, lawsuits often follow.

What are the top three mistakes life and health insurance agents make? Let’s count them down. According to the National Association of Insurance and Financial Advisors (NAIFA), the most common errors that lead to E&O claims include:

  • Misrepresentation. For example, an agent claims a product has a feature it doesn’t actually have. For example, an advisor claims an elderly client can purchase an annuity but get all of his premium back at any time. This misrepresents the surrender-penalty provision, because the person would have to wait seven years to access his money without penalty.
  • Failure to provide. A host of issues might prevent an insured from receiving an expected benefit. For example, a customer requests a review of life insurance needs as part of comprehensive financial planning. While the advisor works on other issues, the client dies, leaving her spouse woefully uninsured. The spouse ends up suing the advisor because he expected to receive a large death benefit when his wife died.
  • Failure to explain. Here, an agent sells a policy or rider, but fails to adequately explain how it works. Case in point: a client likes the idea of combining life insurance and long-term care protection in one contract. So he decides to purchase a hybrid life/LTC policy that provides cash in the event he needs to enter a nursing home. The policy, in effect, pays an early “death benefit” if he can no longer care for himself. When the client develops a chronic, disabling illness and must enter a facility, he begins receiving benefits under the policy, but dies two years later. His wife files a death claim, but learns her payment will be much lower than expected because of the prior payments. She claims to never have heard of this and files suit against the insurer and advisor. This is a classic “failure to explain” situation, since the agent either failed to describe the policy’s features or explained them so poorly the wife had no idea what her husband purchased.

So there you have it: the top three most common E&O mistakes. But there are many other mistakes that trip up life/health agents, including:

  • Selling an unsuitable product to a prospect.
  • Botching a client’s policy-change request, resulting in lower or non-existent benefits.
  • Making clerical errors that result in lapsed coverage and non-payment of benefits at claim time.
  • Sloppily handling life insurance policy applications, resulting in medical conditions not being disclosed to the insurer (and benefits denied at claim time)
  • Advising a client to replace a life insurance policy without explaining that this will reset the two-year contestability period, which in turn results in claim denial similar to the prior scenario.

In short, the common theme behind most E&O insurance disputes is customers failing to receive the benefits they expected, either because the agent processed the business incorrectly, failed to explain contract features, or deliberately misrepresented contract features. Put another way, whenever there’s a gap between expectation and reality in a client’s mind, the risk of getting sued is high.

How E&O Insurance Protects You from Mistakes

As you can imagine, any one of the mistakes just discussed could lead to a five- or six-figure legal judgment. Based on your personal financial resources, losing in court could wipe you out financially, jeopardizing your ability to pay for your children’s education or adequately funding your own retirement.

Faced with such risks, many agents elect to put their heads in the sand. They figure they’ll never make a mistake or that if they do, their clients will forgive them. Clearly, this is flawed logic, since being human means you’re not perfect. Mistakes come with the territory. And since clients are also human, forgiveness may not come as naturally to them as vengeance does.

The better approach is to protect yourself with E&O insurance. But not just any E&O policy . . . one that’s:

  1. Affordable and comprehensive,
  2. Designed specifically for your license type,
  3. Provided by an A rated insurer, and
  4. Easy and convenient to buy from an online platform such as EOforLess.com.

In summary, life and health insurance agents should strive to avoid the most common E&O mistakes, but also prepare themselves should they end up making one. The best solution: purchase high-quality E&O insurance from a marketing firm, insurer, and administrator they trust. To get started, please visit EOforLess.com today.

It’s a truism today that E&O insurance is required for life agents. But let’s explore this notion a bit further. Where does this requirement come from and how important is it for agents to have E&O insurance to protect their businesses?

Let’s start with the fact that working as a life insurance agent is a fundamentally risky proposition. Why? First, life agents often deal with high-value insurance purchases, often designed to fund estate transfers between generations or to facilitate a surviving business partner buying the ownership share of a deceased partner. Such transactions can literally be worth millions of dollars. So it’s not surprising that a life agent’s mistake in setting up these specialized deals can result in substantial client losses and ultimately large E&O insurance judgments. Even smaller life insurance sales to middle-income clients can go awry, leading unhappy clients to file suit and demand restitution.

A second factor is that life agents often serve parents who make financial decisions that displease their children. Or they might have cognitive impairments that lead their children to second-guess their parents’ decisions. In either case, a life agent’s recommendations can lead the second generation to bring legal action against agents. The court battles that  ensue aren’t pretty to watch.

A third is that the current legal and regulatory environment is in flux. With ongoing questions about whether agents in the retirement arena are or aren’t fiduciaries, attorneys will likely be looking for test cases in which they can pin liability on agents who they believe violated their fiduciary duty to their clients.

A final factor is that more agents are setting up their own shops or are working in agencies with less administrative support than ever before. This means they are often required to fill out their own paperwork. Sadly, since agents are better at sales than at administration, they often make sloppy mistakes that can lead to delays in coverage or other problems that harm clients financially. In many cases, when clients lose money, they often turn to the courts for restitution.

Add these factors together and you can understand why E&O insurance for life agents is a requirement today. Because the risks are so large, a responsible agent must protect him or herself against the possibility of getting sued, which can lead to settlements and judgments larger than their total net worth. Without insurance, agents are left with only one option: declare bankruptcy and deal with the life-changing consequences of that decision.

Meeting Your Business Partners’ E&O Requirements

But this addresses only one side of the E&O requirement. The other is the expectations and needs of a life agent’s business partners: insurance carriers, field marketing organizations (FMOs), insurance marketing organizations (IMOs), and managing general agents (MGAs). Each of these recognizes that selling insurance can be risky. So they want to make sure that every agent they appoint has responsible business practices, which includes having high-quality E&O insurance. But they also have a more selfish concern. They want to be sure that clients who’ve suffered a financial loss at the hands of one of their appointed agents don’t seek redress from them rather than from the writing agent. Not surprisingly, as a result, they mandate that all their life agents have E&O insurance to prevent losses from migrating upstream to their “big pockets”.

Consequently, with E&O insurance for life agents becoming a requirement instead of a luxury today, it’s important to purchase and keep in force a good E&O insurance policy that addresses the risks posed by the products they sell. It should also be offered by a high-quality underwriter and supported by a professional administration firm that will provide service after the sale. Finally, they should strive to find an E&O provider that delivers value-added benefits such as free ethics/compliance guidance, free CE courses, free branding tools to increase trust-building in the sales process, and discounts on the purchase of hundreds of products and services for their businesses.

There are many sources in the marketplace today for E&O insurance for life agents. But none that puts all the above pieces together like National Ethics Association-sponsored EOforLess. By visiting EOforLess.com, you can find E&O insurance customized to your specific business practices. Once you’ve made your selection, you can then enroll, apply, and bind you policy in just a few minutes.

Thanks to the power of technology and EOforLess’ innovative process design, life agents can satisfy all their E&O requirements in literally five minutes or less. With this crucial task out of the way, they can focus on doing what they do best—finding prospects for life insurance, assessing client needs, and recommending appropriate solutions. Most importantly, they can go about their business with the knowledge that a litigious client won’t take everything they’ve worked so hard for in a court settlement.

In summary, if you like to sleep well at night, don’t put off buying E&O insurance. It literally can save your business . . . and keep your personal finances intact if you lose a big court battle. Good luck!

Why Life & Health Agents Must Have E&O Insurance

Life is complicated. There are so many things to achieve and so little time. This is why smart people prioritize must-have goals over nice-to-have ones. By focusing their time, money, and energies on their mandatory tasks, they are more likely to create an enjoyable and profitable life. The same logic applies to why life & health agents must have E&O insurance.

As a life & health agent, you’d like to have many things for your business. You’d probably enjoy having a more spacious and elegantly appointed office. You might appreciate having a newer and more luxurious company car. Or perhaps you’d like to join more professional associations or attend more conferences. But would any of these have a material impact on the success of your business? Probably not.

On the other hand, some components of your life & health business are really important, including having:

  • A clear commitment to a target market.
  • Proper licensing to sell products into that market.
  • A marketing program to generate leads.
  • A sales system to convert prospects into clients.
  • A system for completing, submitting, and tracking applications as they move from underwriting to issue.
  • A system that accounts for and tracks your commission payments.
  • One or more computers linked to company networks and/or the Internet so you can communicate to your clients and insurers.

We could go on, but you get the point. Certain aspects of doing business as a life & health agent are absolutely mandatory. When life & health agents lack one or more of them, their business can begin to lose momentum and ultimately stall or fail. The same is true for having E&O insurance.

Agents without essential E&O insurance run the risk of going out of business if they lose a large client lawsuit. Rather than budgeting for an affordable monthly or quarterly E&O insurance payment, they opt to operate without insurance, thinking this is a sensible way to save money. But they truly are missing the forest for the trees. They are thinking only about short-term cash-flow issues rather than long-term company-survival issues. Rather than protecting their business with E&O insurance so they can control their own destiny, they go uninsured, potentially putting their futures in a judge’s hands. Does that make sense?

E&O Insurance: A Sensible Business Resource for Life & Health Agents

Clearly, it doesn’t, especially if you’re looking to have a long-term career in this industry.

The problem is, no life & health agent can know beforehand which client is likely to become an E&O legal disaster. Most customer relationships start out on an even keel. But an unexpected market correction or a serious administrative mistake can transform even the nicest client into an agent’s worst nightmare. Add a skilled plaintiff’s attorney into the mix, and you have a recipe for a catastrophic E&O court battle and potentially business-ending financial judgment.

For instance, according to a major E&O insurance underwriter, the average cost of a life insurance-related E&O claim is about $40,000. If the case involves a qualified pension, the claim cost can reach over $70,000 and for disability-insurance cases, $150,000. Keep in mind these are averages; the outliers on the cost curve can be many multiples of the values just cited.

The good news is E&O insurance for life & health agents can transfer large unknown financial risks into something you can plan for: affordable monthly or quarterly insurance premiums. So what exactly does E&O insurance provide? It gives you the promise of a financial backstop in the unfortunate event you get sued. Your E&O policy will provide cash to hire an attorney to defend you. And if you lose in court, the policy will pay for the settlement or judgment costs, as well as for court fees, up to your E&O policy limit.

But here’s the biggest reason why E&O insurance is mandatory for life & health agents. Not only do insurance carriers, financial marketing organizations (FMOs), registered investment advisors (RIAs), and broker-dealers all require E&O insurance of their contracted producers, advisors themselves must have it in order to do their best work. Think about it. Without insurance, you’ll always be hyper-vigilant about selecting the right clients and acting beyond approach at all times. It’s stressful to be constantly on edge over getting sued, and the extra energy this demands can distract you from other areas of your business such as sales and marketing or professional education.

Agents who protect themselves with affordable, high-quality E&O insurance can focus on doing what they do best:

  • finding prospects,
  • assessing needs,
  • proposing solutions, and
  • serving their client base without always worrying about an aggrieved client coming after them.

In short, do yourself a favor and think of E&O insurance as a mandatory component of your future success. Fortunately, today you can easily find quality coverage online from sites such as EOforLess.com, where you can select the right coverage, apply and pay for it, and print your insurance binder in five minutes or less. So don’t go uninsured for even a day longer. Do the right thing—the essential thing—for your business and visit EOforLess.com today.

Quality of E&O Insurance Is Key

Buying E&O for insurance agents online has become common of late. But just because it’s possible doesn’t mean you’re assured of getting quality protection. You still need to do your homework. This involves understanding your needs and checking out potential providers before making a decision.

We can’t stress enough the importance of evaluating your needs before purchasing E&O for insurance agents. This involves asking some tough questions about your customer base:

  • Do they accept your recommendations or frequently second-guess you?
  • Do they cut you slack in the rare event you make a mistake or hold grudges?
  • Have they been litigious in the past?
  • Do a substantial number have cognitive impairments due to illness or age?
  • Have they been clients just briefly or for a long time?
  • How affluent are they? Would losing a lawsuit involving your largest client account wipe you out financially?

Considering these questions will help you select adequate coverage limits in order to shield your assets from legal attacks. And if you’re not sure about the right amount, always err on the high side. That’s because the added cost of purchasing more insurance will pale compared to losing a big hunk of your assets due to an adverse court judgment.

Once you know how much insurance you need, turn your attention to selecting an E&O insurer that will serve you capably. To this end, consider:

  • the firm’s track record in the E&O insurance market,
  • its reputation on the street, and
  • its financial solvency grades from the major rating agencies.

No Deductible E&O Insurance Is Essential

Once you know how much E&O insurance you need and from whom you’d like to purchase it, request a specimen policy. Read this document as if your financial future depends on it. Pay special attention to the insuring clause and exclusion list to make sure the protection will be there when you need it most.

No deductible E&O insurance is important, as well. As with many other forms of insurance, E&O policies typically require insureds to absorb a certain level of financial loss before their coverage kicks in. In other words, if they get sued, they will pay a portion of their legal fees until they satisfy their deductible. However, at EOforLess, life and health insurance agents benefit from our no-deductible feature. Because our strategy of doing business only with low-risk financial advisors has produced a customer pool with favorable claims experience, our insurer can eliminate deductibles for all. So again, always look for no-deductible E&O insurance as you research your purchase.

The experience and strength of your E&O insurer, appropriate coverage limits, and no-deductible E&O insurance —all combine to produce affordable, high-quality protection. Is your current E&O policy meeting this standard?

Print Your Own E&O Insurance Certificate

Quality is just one piece of our value proposition. Convenience is the other part. When you buy E&O insurance at EOforLess.com, you can literally shop for and purchase the protection you need in minutes. Compare this to the old method of buying through professional liability brokers and you’ll see why thousands of financial professionals today prefer the online alternative.

Take a look at our pain-free shopping experience:

  1. Visit EOforLess.com.
  2. Decide on the type E&O insurance you need—for life agents, P&C agents, RIAs, or Real Estate Brokers—and then click “see plans” to select the appropriate policy form.
  3. Determine an adequate coverage limit. Life/health agents who sell only those plans can choose base coverage. But if you also sell annuities, variable life/annuities, or mutual funds, upgrade to a higher protection level. Then click “buy now” to begin the payment process or “view coverage details” to read the policy provisions.
  4. Review the list of policy features and benefits, along with further information. We also highly recommend you download and carefully read the specimen policy.
  5. After scanning the details, click “buy now” to finalize your purchase. Then fill out the form to establish your account and determine your payment and billing-frequency options. After you finish entering the information, click “Pay & Proceed To Bind Your E&O”.
  6. If you are able to answer “no” to all the underwriting questions, click “pay” to bind your coverage.
  7. Ready to print E&O certificate? Just hit “print” to output your E&O insurance certificate.

The last step reinforces the power of buying E&O insurance online. In the “old days,” to get an E&O insurance certificate, you needed to contact an E&O insurance broker, go through a lengthy sales process, and then wait days or weeks for insurers to respond with premium quotes. Then you’d have to meet with or speak to the broker again to select the best policy and fill out a paper application. Finally, after much waiting, you would receive your E&O insurance certificate.

If you needed that document right away to pursue a sales opportunity, you’d be out of luck. The process simply took too long. However, if you had purchased your E&O insurance from EOforLess, you would have been able to print an E&O certificate in 5 minutes or less. It’s easy to see why thousands of insurance agents and financial advisors prefer to buy their E&O insurance at EOforLess.com. It’s simply a quicker, better way to buy.

In summary, if you’re shopping for E&O insurance for the first time—or switching to a new insurer—visit EOforLess.com now. We help busy insurance agents and financial advisors save time, money, and aggravation, while protecting their finances against catastrophic loss. What’s not to like?