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Top Questions Business Owners Have about E&O Insurance and Where to Buy It

As an insurance or financial-services business owner, it’s fair to assume you’re pretty sophisticated in your understanding of insurance. You’ve likely sold life insurance, health insurance, annuities, or property-casualty insurance in the past. You definitely know your way around a specimen insurance policy. However, we’ve found that agents and advisors often know more about the insurance they sell than the coverage they buy. This knowledge gap can really hurt if they fail to buy the wrong kind or amount of insurance.

To avoid such problems, here are answers to four questions that trip up insurance agents looking for E&O insurance.

  1. Do I really need E&O insurance?

It’s hard to believe, but many insurance entrepreneurs have trouble with this question. Why? Because they don’t feel at risk. They believe their knowledge and skills are sound and that their business practices are both ethical and compliant. They think this immunizes them against lawsuits. What’s more, they have great confidence in their ability to read human nature and avoid troublesome clients. Given these beliefs,  agents often conclude they have no need for E&O insurance and that buying it is a waste of money. But just as smokers often think cancer always happens to someone else, until it happens to them, insurance professionals assume they’re immune to getting sued . . . until they get sued. At that point, it will be too late to transfer their legal exposure to an insurer via E&O insurance. You can read the benefits of being covered by E&O insurance here.

  1. How much E&O insurance should I purchase?

Insurance agents who typically advise their clients to load up on as much life insurance or personal liability coverage as possible are often the first to skimp on their E&O insurance. Perhaps it’s because they feel immune to lawsuits. Or maybe they get more satisfaction from spending money on more appealing things like new cars, vacations, or hobbies. Compared with these choices, buying E&O insurance can seem mundane.

Whatever the reason, insurance agents often skimp on their own E&O insurance instead of buying more than they need, even though the cost difference between the latter and the former may be minimal. Our recommendation: be realistic and purchase the most E&O insurance you can reasonably afford.

  1. What type of E&O insurance should I buy?

At first blush, deciding on the type of E&O insurance to buy is much easier than deciding on the best form of life insurance. That’s because there are only two issues to consider. First, make sure the policy is written for your specific professional duties and regulatory license. If you’re a life/health insurance agent, then you want to buy a policy designed with your life insurance sales and service duties in mind. How to determine? Request (or download) a specimen policy and then read the insuring clause to see if all your duties are listed. If one or more are not, look for a policy with more comprehensive coverage.

Second, determine whether the policy is a claims-made policy form or an occurrence form. With a claims-made policy, the coverage in force at the time you file a claim will be the one that shields you, not the one in effect when the precipitating incident occurred. With an occurrence policy, the coverage is determined by the date of the incident, not the date of the claim.

Two lenses through which to view the claims-made vs. occurrence issue are breadth of coverage and cost. Claims-made policies will pay benefits only when claims are reported while the policy is in force. If you drop your policy and a claim arises later, you will be left unprotected, unless you purchase so-called extended reporting period. Also, if you had a coverage gap at any point in the past, a claims-made policy will only protect you back to the point at which you dropped your coverage, but not before the gap. To cover that prior period, you will need to buy prior-acts coverage.

Occurrence policies, on the other hand, have the benefit of simplicity. They protect your actions during a given policy year in perpetuity, even if you drop the policy. You don’t have to worry about buying ancillary protection for gaps either before your coverage kicked in (“nose” coverage) or after you dropped it (extended reporting period or “tail”). However, since occurrence policies don’t have gaps and provide separate coverage limits for each year the policy is in force, the protection is much broader and therefore more expensive than claims-made policies are. Which is right for you? If you prefer simplicity and more comprehensive protection, despite higher costs, then consider buying an occurrence E&O insurance policy. If you would rather save money and are confident you won’t have a coverage gap, then opt for a claims-made policy form.

  1. From where should I buy my E&O insurance?

The answer depends on whether you want to buy E&O insurance through a broker or whether you’re comfortable buying it online. The former approach might be warranted if you have a large agency and/or you’re involved with many types of financial services or risky ones such as alternative investments. To scope out your exposures, consult with an experienced E&O insurance broker. Working with such a person also gives you access to more insurers. If your situation is unique or highly risky, having a broker shop it around can help you find the right insurer and coverage at an affordable price.

However, if you have a simpler business and only sell low-risk products, consider buying from an online provider such as EOforLess. EOforLess offers E&O options for various types of financial professionals. As long as you verify that the policy covers your specific job activities, buying online can save you a lot of time and money. In fact, EOforLess allows you to establish an account, submit an application, pay for your policy, and click and bind your coverage within just a few minutes of arriving on our site. For busy agents with simple needs, online buying is usually the way to go.

In conclusion, if you’re shopping for E&O insurance, stay focused on the big-picture issues we’ve discussed in this article. But here’s the most important point of all.  When considering what to do about your professional liability risks, just follow the advice you give your clients. Understand your risk exposure, match it to appropriate and cost-effective insurance, and keep your policy in force at all costs. Follow this advice and you will be in great shape with your E&O insurance today and for decades to come. Good luck!

What’s the best way to keep your life & health insurance business protected against client lawsuits? The most important, obviously, is to have E&O insurance. But close behind is making sure your business practices don’t make you vulnerable to common E&O insurance claims. According to a major E&O insurer, they are most likely to arise from the following causes:

  • In the top position is misrepresentation, accounting for 25 percent of all claims filed by members of a major life insurance trade group. Misrepresentation occurs when you make a statement about a product you sell that is false or misleading. For example, you might claim an annuity has no surrender penalties when, in fact, it does. When your client discovers that he can’t get all his money back within the first seven years, he may file a regulator complaint against you or bring suit in court.
  • In position #2 is failure to provide, which accounts for 13 percent of claims. This refers to an agent not providing necessary insurance coverage even though it was (or should have been) clear that the client needed it. A common situation is when an agent conducts an initial fact-finding interview that uncovers a host of insurance risks that need to be addressed. However, because of the press of other business, the agent fails to address one of the risks on a timely basis, and the insured suffers a loss before she can purchase the needed insurance. Bringing an E&O insurance claim in this situation is a common client scenario.
  • The third most common claim is known as “failure to explain,” representing 11 percent of reported losses. This occurs when an agent sells an insurance or financial-services product or rider, but fails to fully explain how it works. Here’s one possible example: a husband purchases a hybrid life insurance/long-term care policy, which is designed to not only provide a death benefit, but also a nursing-home care benefit in the event the husband needs custodial care. On the surface, such policies are attractive because they cover two risks simultaneously. However, sometimes agents fail to explain that receiving long-term care benefits will reduce the amount of life insurance benefits that can be paid later. That’s because the LTC benefit is essentially an accelerated death benefit. If an agent doesn’t explain the nuances of how such a life/LTC combo plan works, the surviving spouse may be surprised to learn she will receive a much lower death benefit than anticipated because of LTC benefits already paid out. Surprises such as this often lead to disappointment, anger, and, ultimately, lawsuits.
  • In fourth position are so-called office errors, a catch-all term referring to various clerical errors that can result in lower than expected insurance payments or no benefits at all. Examples of office errors, which account for 11 percent of claims, include botching client policy-change requests, not apprising clients that they unintentionally let their policies lapse through non-payment of premiums, or sloppy handling of life insurance applications, which result in claims being denied because clients failed to disclose a material fact to the insurer.
  • Finally, the fifth most common claim, representing 6 percent of lawsuits, are premium errors. These happen when agents and clients cross wires and premiums aren’t remitted to insurers on time, resulting in coverage not being available after an insured suffers a loss. If this ever happens to you, you can be certain you will have an angry, frustrated, and litigious client on your hands.

Given the wide range of claims life & health insurance agents are susceptible to, what are the best ways to protect yourself? The first step is to adopt a risk-management approach to running your business. Take a look at all of your customer-facing processes and make sure they are in good shape. If they are running inefficiently or generating too many errors, then re-engineer them as soon as possible.

The second step is to purchase a comprehensive E&O insurance policy from an online provider such as EOforLess.com. Having your own E&O insurance means you’ll have a financial backstop in the event a judge orders you to pay a large settlement or judgment to a client who beats you in court. It will also provide funds to retain a defense attorney, for expert witnesses, and for court expenses. Without E&O insurance behind you, you will always be one lawsuit away from potential bankruptcy and always beset with stress and worry about your future.

Wouldn’t you rather do business without always having to second-guess your decisions from an E&O perspective? Of course, you would. Which is why you should consider purchasing E&O insurance from EOforLess, the online pioneer of click-and-bind insurance for financial professionals. Contact us today to learn more about our coverage options.

Finding new clients and servicing your existing client base is more than a full-time job. Which means the last thing you want to do is spend time you don’t have on tasks you no longer need to do. Case in point: buying E&O insurance offline.

If you’ve bought errors and omissions insurance the old-fashioned way—that is, by speaking with brokers, getting multiple paper quotes, and applying and paying for it off the Internet—then you know how frustrating the process can be. It’s doubly annoying to spend time on antiquated insurance buying when you’re already pressed for time. It’s much better to click and bind your E&O insurance online, investing the time you save into more productive areas such as marketing, sales, or customer service.

Think about it: buying E&O insurance offline is so passé. Here are all the tasks that outmoded task involves:

  • Looking around for an E&O insurance broker, either by checking insurance-industry or yellow-page directories, Googling, or asking friends and colleagues for a referral.
  • Contacting each broker and setting up “get-to-know-you” meetings.
  • Speaking with each broker in person or over the phone to discuss your business and E&O insurance needs.
  • Waiting days or weeks for the brokers to shop their markets for an insurer with an appetite for your risk and the expertise to insure it.
  • Waiting even longer for the broker to package up several quotes from insurers in a hard-copy proposal.
  • Waiting for the proposal to arrive in the mail or via e-mail.
  • Reviewing the proposal and deciding which broker/insurer is most appropriate and cost effective.
  • Contacting the winning broker and making arrangements to pay for the policy.
  • Waiting for the insurer to process your payment and remit a coverage confirmation.
  • Receiving your new policy and reviewing it to make sure it’s correct.

Is it any wonder the insurance entrepreneurs at the National Ethics Association and its E&O insurance unit, EOforLess.com, envisioned a better approach? With their errors and omissions online portal, EOforLess.com, you can now buy professional liability insurance with zero aggravation in 10 minutes or less. Here’s what our simple online process entails:

  • Visit EOforLess.com.
  • Click on the specific type of E&O insurance you need based on your license type—i.e., life insurance agent, property-casualty insurance agent, registered investment advisor, or real estate agent/broker-owner. Then click on “see plans” to review the policies available for purchase.
  • Click on “view details” to drill down on your policy specifics. This will include a full list of features and benefits and other contractual items. If you are serious about due diligence, you can also download a complete specimen policy for careful reading.
  • After you review the details and decide the policy meets your needs, click on “buy now” to begin the purchasing process. This involves establishing an EOforLess account and selecting your payment and billing-frequency preferences.
  • Next, click on “Pay & Proceed to Bind Your E&O,” which will bring you to the underwriting screen.
  • If you can answer “no” to all of the underwriting questions, click “pay” to purchase and bind your errors and omissions insurance coverage.
  • Finally, click “print” to receive your errors and omissions insurance proof of coverage. This is the document you’ll provide to your FMO and the insurers with whom you have appointments.

Could buying E&O insurance be any easier? And could the advantages of online buying be any more compelling? For example, when you buy E&O insurance from EOforLess.com, you will be able to get an insurance certificate in just a couple of minutes. This is important when a client has a unique need for insurance for which you need to secure a new insurer appointment. Immediate click and bind allows you to get appointed and close the sale without delay.

Or what if you’re new to the industry and need to find E&O insurance right away? Since you don’t know many people in the business yet, it will be hard to get referrals to a good E&O insurance broker. Rather than spin your wheels, you can just buy your coverage in minutes from EOforLess.com.

Finally, if you lapse your current E&O policy by mistake and don’t want to reinstate it with your prior insurer, you can secure a new one in minutes from us, minimizing a potentially dangerous E&O coverage gap.

Any way you look at it, click and bind is the way to go when buying E&O. And EOforLess.com is your place for quality coverage at a price you can afford. Is your policy up for renewal soon? Then visit the pioneers of click and bind today for an E&O solution you’ll appreciate tomorrow.

 

When it comes to E&O insurance, surprises are the last thing you need. For example, if a client begins to threaten you with a lawsuit, you want to know your E&O insurer will stand behind you, not that there isn’t enough coverage left in the policy to protect you. Similarly, there are many nuances in E&O policies that may catch you by surprise if you haven’t uncovered them ahead of time. Here are seven common examples.

  1. Did you know that all “claims made” policies aren’t made equal? Some policy forms are a purely claims made design, while others are “claims made and reported.” The difference? The latter provide coverage only if you file a claim within the policy term or within a short period thereafter. If you try to file the claim after either of those two-time frames, you may find yourself without coverage. Solution: read your policy to confirm which type you have.
  2. Does your policy cover your specific duties? To find out, read your policy’s insuring agreement to see how it defines professional services. It will typically be quite explicit about whom and what it covers. For example, one life insurance agent E&O policy has this definition: “Coverage is limited to general agents or agents with valid licenses in a client’s state or jurisdiction, as well as the general agent’s or agent’s state or jurisdiction, and who are involved in the sale or servicing of life, accident, and health insurance, disability insurance, and indexed or fixed annuities. Covered duties also include financial planning and supervision and training of agents.” The key point? Your actual duties must align precisely with the policy language in order for you to have coverage under the policy. For example, if you have a sideline real estate business, you will not be covered under this policy because those activities aren’t listed in the insuring clause.
  3. Are you familiar with your policy’s exclusions? One of the most common ways E&O policies surprise agents is when they file a claim and the insurer tells them an exclusion applies. If this has ever happened to you, you know how infuriating it can be. Solution? Whenever you purchase a new E&O insurance policy, immediately read the exclusions list. Doing so, for example, will show you’ll have no coverage for claims arising out of litigation that occurred before the policy’s effective date or were in process on that date. Or that E&O claim payments that benefit a family member won’t be covered. Or that financial advisors will not be covered for E&O losses if they use or disclose confidential client information or non-public information. There will be a dozen or more scenarios in which you might assume coverage, but that your policy, in fact, excludes. Study your contract so you know exactly what exclusions apply.
  4. Are you aware of the nuances of coverage limits? The first is the difference between per-claim and aggregate limits. As its name suggests, the former establishes a maximum dollar amount that can be paid on a given claim from an insured. The aggregate limit refers to how much coverage is available for multiple claims from one insured in a given year. However, shared limits introduce a further complexity. Here multiple people within a firm may be covered under one master policy with a limit that applies to every agent and/or advisor insured under the policy. So if the firm suffers a large number of E&O insurance claims in a year, which consumes the entire shared limit, you will be out of luck if you need to file a claim later.
  5. Did you know that some E&O insurance policies apply the stated deductible for all claims filed in a policy period? So if you have five claims and your deductible is $1,000, you will be on the hook for $5,000. Other policies provide for an aggregate deductible for multiple claims. In the example given, this might limit your deductible to only $2,000 in E&O claim outlays in a given year.
  6. Have you heard of E&O policies that apply your deductible to legal fees as well as to claim payouts? Policies with so-called defense-and-loss deductibles make you pay for legal fees up to the deductible amount even if the claim is ultimately proved groundless. Compare that to E&O insurance policies with first-dollar deductibles, which only require you to pay if you’re found liable and a claim payout is required. Obviously, the latter type is more appealing.
  7. Finally, does your claims made E&O policy have an extended reporting period or “tail” provision? This will allow you to file a claim even after your policy expires, as long as the wrongful act happened prior to the end of the policy period. Although most E&O policies have this feature, the length of the period can vary. EOforLess’ life/health agent E&O policy has an unlimited extended reporting period. This can be important if you are planning to sell your business.

E&O insurance policies for life and health insurance agents, P&C agents, registered investment advisors, and real estate agents and broker/owners have many other nuances. To make sure your business is fully protected, carefully read your policy’s fine print. This way, in the unfortunate event you need to file a claim, you will avoid nasty surprises that put you at risk.

But here’s the good news. Many of these surprises can be avoided entirely by purchasing the right policy in the first place. By reading specimen policies before you buy, you can select one from a company that doesn’t impose restrictive provisions. Shopping carefully can literally save you tens of thousands of dollars or more at claim time. Worth the extra work? You bet!