E&O Insurance

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!

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