Errors & Omissions Are Human, But Relief From Liability Is Divine

How Can a Policy of E&O Insurance Save Your Business?

As much as financial professionals would like to be perfect, they aren’t. They are prone to making mistakes because they are human. And those so-called errors & omissions can be expensive to resolve, at best, and fatal to a business, at worst. Fortunately, a policy of E&O insurance can save their business with proper planning and commitment.

Part of the problem is every segment of the financial world has become more complex over the years. Whether it’s life or health insurance, investments, property-casualty insurance or real estate, the amount of knowledge required to do business has exploded. The regulations that affect professionals have become mind numbingly complicated. For example, the U.S. Department of Labor’s Fiduciary Rule, slated to take effect in April 2017, includes over 1,000 pages of dense requirements. And the technologies professionals use to do business evolve so quickly it’s hard to keep up. In this environment, it’s easy to make a mistake through lack of information or time or through a sloppy mistake.

What’s more, even an innocent mistake can explode into a nasty client lawsuit and a potential financial judgment that can cost tens of thousands, if not hundreds of thousands of dollars, to resolve.

Consider this: according to a top E&O insurer writing E&O insurance for life and health insurance agents, there are at least 11 major mistakes an agent can make, ranging from misrepresentation, premium errors, and failure to explain or provide coverage to policy change errors and beneficiary-related mistakes. But making a mistake is just the beginning. The same insurer found that the average insurance settlement for a disability-insurance related claim was $149,000. Experts say claim costs for large investment accounts can easily hit half-a-million dollars or more, depending on the amount of assets under management.

Being on the hook for a six-figure or higher legal judgment is not something most financial professionals can fund out of petty cash. In fact, most would have to liquidate some or all of their assets in order to pay for a significant legal judgment. How would you pay for a bill this large? Would you have to declare bankruptcy in order vacate your legal liability? How would you continue to meet your financial commitments—say, sending your children to college or funding your own retirement?  If you had to put your entire financial life on hold in order to deal with a nasty E&O dispute, then E&O insurance is made to order. Without a doubt, errors & omissions are human, but relief from liability is divine.

Don’t Get Left on the Hook for Mistakes You Didn’t Mistake

Compounding matters is that many E&O claims fall into the nuisance category. Sometimes clients take offense at their financial advisor for bogus reasons and retaliate by bringing suit. Other times, they have unrealistic expectations about how their financial products should perform or believe their advisor sold them a bill of goods when in fact, they failed to listen to their advisor’s explanations. Whatever the cause, nuisance lawsuits constitute a large portion of America’s legal docket. But this doesn’t render them meaningless; financial professionals still have to defend themselves against even the craziest of lawsuits.

Imagine being sued for something you didn’t do and then losing a court battle. Wouldn’t that be the ultimate case of adding insult to injury? A better solution: Don’t get left on the hook for mistakes you didn’t make. Research your financial liabilities and then shop for an affordable, yet comprehensive, E&O insurance policy from a provider such as EOforLess.com. This is crucial because even though you might be dealing with a nuisance claim, the costs in time, money, and aggravation are all too real. Being properly insured with E&O coverage will ensure you aren’t left holding the bag financially for something you didn’t do.

Get the Proper Insurance Policy to Fully Cover Your Company

However, locking down this protection doesn’t just happen. You need to get the proper insurance policy to fully cover your company. How? By doing your research and shopping for high-quality coverage that is affordably priced. Here are some pointers that might help you achieve a desirable outcome.

• First, if your needs aren’t overly complex, take a look at policies issued on a group basis. This typically will yield cost advantages due to the lower costs of insuring large numbers of individuals on a common platform. But if you have an extremely large business and are looking to also insure sub-agents and brokers, then you may wish to consult with an E&O insurance broker. Should that be your situation, understand that dealing with individual brokers will typically require more effort and time due to the complexities of assessing larger risks and shopping them around to multiple insurers.
• Second, try to take advantage of providers that offer streamlined E&O insurance underwriting, using a limited number of risk-assessment questions to determine eligibility. With such entities, you might be able to receive a lower premium if the company determines you are an attractive risk.
• Third, check out online E&O shopping platforms, which greatly reduce the time and effort of dealing with bricks-and-mortar insurance agencies. At EOforLess.com, for example, the average buyer can select appropriate coverage, fill out an application, and pay for and bind their insurance in 5 minutes or less.
• Fourth, once you have the proper E&O insurance policy for your business, strive to keep it in force. This will eliminate any coverage gaps that could leave you uninsured when you need full coverage the most.

In conclusion, E&O insurance is designed to help financial professionals mitigate the risk of getting sued, a risk that can be substantial because they are human and prone to making mistakes. But self-insuring this risk is no longer necessary—or recommended—because  relief from liability isn’t just readily available and affordable, it’s divine!