Don’t Be a Victim of Errors & Omissions

It’s a given that financial professionals make mistakes. They’re human, after all. The key is for them not to become a victim of their own errors and omissions. Let’s consider that statement a bit further.

It’s totally natural for insurance, investment, and real estate professionals to make errors and omissions. Why? Because every day they . . .

  • address complex problems,
  • are required to follow highly demanding regulations, and
  • operate in an environment of uncertainty and rapidly changing technology.

Given these forces, it’s a wonder financial professionals don’t make more mistakes than they do.

The issue isn’t that they make mistakes. The problem arises when they become a victim of their mistakes. This can happen in two different ways:

First, financial practitioners sometimes make a mistake and then shrug it off. Rather than assess why they erred in order to prevent it from happening again, they just put the whole incident behind them. In this scenario, an unwillingness to reflect on one’s mistakes and to make adjustments in business practices can trap financial professionals in a perpetual cycle of errors & omissions.

Second, failing to learn from their mistakes can be compounded by not having the proper amount and/or type of E&O insurance in place. Without appropriate liability protection, financial professionals become victims once again. They’re forced to pay out of their own pockets for legal judgments, legal fees, and court costs potentially amounting to tens, if not hundreds of thousands of dollars. By failing to protect themselves, they run the risk of losing their firms, their savings, and their financial security. They become victims of self-created mistakes, and it’s not a pretty sight.

There’s a better way . . . purchasing quality and affordable E&O insurance.

What Can a Full Policy of E&O Insurance Do for You?

Errors & Omissions

The key to not becoming a victim is advance planning. Financial professionals must acknowledge that . . .

  • the risks of getting sued are large,
  • that the potential costs of losing a client lawsuit are immense, and
  • that sensible business professionals arrange to transfer their liability risks to an E&O insurer in order to make them more manageable.

At the end of the day, thinking proactively and realistically about client lawsuits is the ultimate way to avoid victimhood.

So what can a full policy of E&O insurance do for you? In a nutshell, E&O insurance provides financial protection for your business. It generates funds that cushion the financial outcomes of losing a client lawsuit. It does this by providing money . . .

  • to pay for an attorney,
  • to cover the expense of legal judgments and settlements, and
  • to cover court costs that may be levied against you.

By having comprehensive E&O insurance protection, financial professionals avoid becoming personally liable for the direct and indirect financial implications of their error & omissions, up to their policy’s limits.

E&O insurance also provides two less obvious benefits. First, it provides assistance from a highly trained, professional claims adjuster who will help investigate and settle the claim. This allows financial professionals to continue working in their business rather than having to focus on dealing with a client complaint and/or lawsuit. Second, having E&O insurance means financial professionals don’t have to obsess about the financial risks of getting sued. They can simply concentrate on doing great work for their clients without endlessly worrying that their words or actions might spark a lawsuit.

Get Your Full Errors & Omissions Insurance Policy Today

The essence of victimhood is letting external events hijack one’s life. Financial professionals who take control of their destiny will never be victims, in part because they arranged to purchase a full Errors & Omissions policy at the earliest opportunity. How to best proceed? By looking into comprehensive and affordable E&O insurance from online providers who make shopping for coverage quick and convenient. One such entity is

Sponsored by the National Ethics Association, provides a user-friendly platform for financial professionals to easily shop for and purchase high-quality E&O insurance protection. Their website helps professionals buy E&O coverage directly from an insurer without having to go through a broker. Using the firm’s class-leading online shopping platform, agents and advisors can quickly select their desired coverage level and then “click and bind” their policy in minutes. What’s more, buying through means they never hassle with shopping delays, hidden fees, or deductibles (for life/health policies only).

Bottom line: financial professionals who wish to never become E&O victims must take control of their futures. They must do their best to prevent mistakes. But if they do make one, they should learn from it so they never repeat it in the future. And most importantly, they should purchase E&O insurance so that a mistake never becomes a permanent financial catastrophe—for their business, for their families, and for their financial security.

E&O Insurance

The benefits of E&O insurance aren’t what they seem initially. Many financial professionals view E&O insurance as a way to protect themselves against client lawsuits. If they win in court, their policy will pay for their attorney fees. If they lose, it will cover the cost of the legal judgment, along with court expenses. Is that all there is? Hardly.

The benefits of E&O insurance include a host of additional direct and indirect provisions, all designed to preserve an insurance, investment, or real estate professional’s financial viability, both today and decades from now. Let’s discuss a few of these “hidden” benefits.

In terms of direct benefits, E&O insurance policies typically not only pay for attorney fees, but also for:Errors & Omissions Insurance

  • Expert witness charges,
  • Copying, filing, and software-related expenses,
  • Arbitration or mediation costs, and
  • Expenses related to settling the claim.

When you add the above cost items to the expense of hiring an attorney and potentially of paying for a large legal judgment, financial professionals might face tens of thousands, if not hundreds of thousands of dollars, in claim expenses. E&O insurance policies are designed to transfer these obligations from the insured to the E&O insurance company.  When compared to the direct financial exposure of losing in court, paying for E&O insurance premiums makes a lot of business sense. It allows financial professionals to trade a potentially catastrophic and highly unpredictable expense for a much smaller, more predictable expense. Most business people find this a trade well worth making.

What about indirect benefits? In addition to providing cash to pay for the financial aftermath of a successful client lawsuit, E&O insurance policies also provide three non-financial benefits.

  • The first is the ability to have an E&O insurance claims adjuster on your case to facilitate the investigation and settlement process. This person teams up with your attorney to handle all of the steps involved in negotiating with the plaintiff and in tracking your case’s progress through the legal system. Without E&O insurance, you’d have to handle all this work yourself, reducing the time available to work on your business. “Many financial professionals who are fighting a major client lawsuit find it difficult to focus exclusively on their normal work,” says Steven R. McCarty, Co-Founder and Chairman of and of its sponsor, the National Ethics Association (NEA). “As a result, their compensation often plummets during this time, causing significant financial hardship.”
  • The second indirect benefit of having E&O insurance is the ease of mind that comes from knowing you’re protected against potential client lawsuits. Knowing you don’t fully “own” the risk of getting sued can reduce your stress and make it a lot easier to sleep well at night and to work productively during the day. “Similar to having good health, you simply can’t put a price tag on peace of mind,” says NEA’s Steve McCarty.


  • The third indirect benefit relates to helping financial professionals avoid the errors and omissions that generate legal action. At, all insureds receive extensive ethics and compliance guidance that helps them not only do business the right way from a moral perspective, but also in a way that does not violate industry regulations.

How does this work? To qualify for E&O insurance from, financial professionals must first join National Ethics Association. Membership provides a number of important privileges, including:

  • The ability to stamp their business with the “ Registered Member” seal, which enhances online reputation.
  • The opportunity to purchase a Certified Background Check on themselves and their business, which builds consumer trust and shortens the sales process.
  • Visibility in the NEA Member Directory, which can generate traffic back to the professional’s own website.
  • Access to hundreds of local and national discounts for their business or home, which saves money.

But the most important indirect benefit of E&O insurance is access to NEA’s loss-control guidance. This comes in the form of ethics and compliance educational content that motivates advisors to follow ethical and compliant business practices. This information can be found in the “Ethics Center” at Plus NEA also frequently shares this guidance with members via their periodic newsletters and bulletins.

By knowing how to treat their customer right and how to follow all relevant regulations for their license type, financial professionals will greatly reduce their risk of getting sued. This may well be the most powerful E&O insurance side benefit of all.


“Can I buy quality E&O insurance online?” That is a great question many financial professionals are asking themselves today. With insurance as important as professional liability, the last thing they want is a policy that leaves them unprotected when they need it most. They also don’t want to buy coverage that is confusing, hard to shop for, or too expensive.

To this end, online E&O insurance providers such as have developed technology platforms that . . .

  • simplify the process of buying E&O,
  • allow low-risk financial professionals to buy it affordably, and
  • assure that all insurers and administrators involved in the program meet quality standards.

But the question is, which online E&O provider can be trusted to deliver?

The key is to carefully inspect every aspect of the firm’s online shopping platform to make sure it provides:

  • extensive coverage options,
  • ease of use, and
  • adequate post-sale support.

Visitors to will quickly notice that it’s extremely easy to select the right policy, apply for coverage, and pay for it online. Within minutes, financial professionals can bind and print their E&O insurance in order to secure appointments with sales intermediaries and/or insurance carriers.

Solving the quality issue starts with selecting an appropriate policy type for a financial professional’s needs. At, coverage is available for life & health agents, P&C agents, registered investment advisor representatives (RIAs), and real estate brokers & owners. For each business type, buyers can click through to evaluate different levels of coverage corresponding to their business model and regulatory license.

For example, life and health agents who manage a “vanilla” life practice—i.e., selling only life, accident, health insurance, and long-term care products—can select base-level coverage. However, those who sell all the above products plus fixed and indexed annuities can select a higher-level coverage.  Finally, those who sell all the above products, as well as variable life, variable annuities, and mutual funds, can select top-tier coverage. As they climb up the coverage “ladder,” the operating risks of that business model increase, which means the buyer’s E&O premium will rise accordingly.

For each business model/license type, provides an informative coverage summary, along with a complete specimen policy via download. After reviewing the summary and specimen policy, E&O insurance purchasers will know exactly what they bought . . . and will have the confidence of knowing they will be protected should a client sue them.

Quality also manifests itself in how easy it is to buy E&O insurance online at Once they’ve picked the right coverage, financial professionals simply click the “Buy Now” button. This takes them to an easy, two-step purchase process:

  1. Enroll in the National Ethics Association (sponsor of This involves providing some basic information and submitting billing and payment option details for the membership.
  2. Apply for E&O coverage from This involves providing information about their business, as well as answering a short list of risk-assessment questions. If the agent qualifies, they simply purchase the policy they’ve selected and bind their protection.

Agents also have the ability to print a proof-of-coverage document immediately in order to show marketing intermediaries or insurance/investment firms that they have adequate E&O insurance protection.

Another quality indicator is the degree to which E&O buyers must shoulder a portion of their claim costs. At, life and health agents will never pay for deductibles or for any other hidden fee.

At the end of the day, when they deal with, life/health insurance agents, P&C agents, investment advisors, and real estate professionals will know they purchased quality E&O insurance for an affordable price, with minimal effort, in five minutes or less. What’s not to like about buying E&O insurance online?


A quality E&O shopping experience doesn’t just involve being able to select the right coverage and to buy it easily and quickly online. It also involves having reliable post-sale support in the event financial professionals have a problem with billing or find themselves facing a client complaint and/or litigation.

In short, financial professionals have many different ways to buy E&O insurance online. But not all shopping platforms are created equal. To assure that they purchase the right coverage at an affordable price and that they get post-sale support, they should only deal with firms that have extensive experience, a commitment to provide an easy and convenient buying experience, and administrator and insurance carrier relationships that securely backstop the program. succeeds on all these counts . . . and more.

Under new rules effective May 16, 2016, the public can now invest in early-stage start-ups via online platforms that are subject to registration and disclosure requirements. For their part, consumers are limited in how much they can invest based on their income and net worth. The U.S. government permitted crowdfunded investing as part of its Jumpstart Our Business Startups (JOBS) Act and the SEC’s enabling “Regulation Crowdfunding.”

Although financial advisors will presumably not be involved in the sale of such products, their clients may well ask their advice about them. To limit their E&O insurance liability, the National Ethics Association suggests advisors consider educating their clients about the risks of such investments in general, while avoiding making recommendations about a specific offering. They should also document any discussions they have on this topic in their customer-relationship management (CRM) system.

To help clients stay safe . . .

Urge them to carefully consider the risks—and the potential loss of capital—from making such investments. Startups and early-stage ventures can and do fail. Make sure clients are comfortable with, and capable of, losing their entire investment.

Remind them that crowdfunded investments can be highly illiquid. They will be limited in their ability to resell their investments for the first year—and may need to hold their investment for an indefinite period of time.

Caution them that they will be limited in how much they can invest. If either their annual income or net worth is less than $100,000, then during any 12-month period, they can invest up to the greater of either $2,000 or five percent of the lesser of their annual income or net worth. If both their annual income and net worth are equal to or more than $100,000 then, during any 12-month period, they can invest up to 10 percent of their annual income or net worth, whichever is less, but not to exceed $100,000.

Tell them they must never make a crowdfunded investment directly with a start-up firm. Instead, they should only deal with a broker-dealer’s online platform or with a so-called funding portal, a new type of intermediary created by the JOBS Act, the enabling federal statute. Advise customers that broker-dealer online platforms and funding portals must be SEC registered, as well as a FINRA member.

Encourage them to read the disclosure document entitled, “Schedule C.” Available on the SEC’s Edgar system, it provides, among other things, the following information:

  • A description of the business of the company and its anticipated plan of business, including its name, legal status, physical address and website address.
  • A discussion of the material factors that make an investment in the company speculative or risky.
  • A discussion of the company’s financial condition.
  • The names and positions of the directors and officers; the name of each person who is a beneficial owner of 20 percent or more of the company’s outstanding voting equity securities; and additional information such as the business experience of the directors and officers over the past three years.
  • The price of the securities or the method for determining the price.

Make sure they know the minimum required disclosures that pertain to each level of crowdfunded investing. The larger the investment, the more third-party scrutiny the start-up’s financial statements will receive.

Finally, advise them not to get carried away with enthusiasm over this innovative form of investing. As with all things financial, investor caution is the watchword, especially with something so new.

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