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“Actions speak louder than words,” goes the old saying. This is especially true in life insurance, where agents who deliver on their promises outpace those who breach them. One especially important action is purchasing E&O insurance for your business. This doesn’t just protect your finances against client lawsuits; it sends a powerful message to your customers that you are a responsible financial professional . . . one who will make them whole should you ever make a mistake.

For this reason, buying E&O insurance is likely the most powerful method available for building client trust. Why? Because it sends your clients five compelling messages:

  1. That you have a fiduciary mindset. Even if you are not legally required to uphold a fiduciary standard of care, buying E&O insurance shows you have a fiduciary attitude. It conveys the message that you care about your clients’ financial well-being and will do your best to preserve and enhance it.
  2. That you believe in the value of risk assessment  and mitigation. In other words, when you buy E&O insurance, you model for your clients the same steps you’d like them to take . . . assess risks, identify key exposures, and transfer those exposures to an insurance company in exchange for paying premiums. When you buy E&O insurance, you encourage clients to purchase the insurance they need to keep them and their families safe.
  3. That you believe in being a responsible life insurance agent . . . willing to own up to and remediate your mistakes. E&O insurance is a cost-effective way to make clients whole after you make a costly mistake. Knowing that you have this protection in place will be a tremendous comfort to your customers. And they will respect you for it.
  4. That you are in this for the long haul. Having E&O insurance tells people you intend to stay in business for years. Since your policy serves as a financial backstop in case you lose in court, you won’t have to liquidate personal assets or shutter your business to cover a legal judgment. Clients will appreciate your financial resilience and longevity.
  5. That you will focus 100 percent on their needs because you won’t always be worried about making mistakes or getting sued. In short, having E&O insurance liberates you to do your best work for your clients; constantly second-guessing your actions and worrying about your legal exposures will be things of the past.

For all of the above reasons, it makes great sense for you to buy E&O insurance and to keep your policy in force at all times.  It’s an excellent way to demonstrate your long-term commitment to your clients, in good times and in bad.

If you’re ready to begin sending these messages to your clients, take the next step and visit EOforLess, an online provider of affordable E&O insurance. There you’ll find options for protecting your business and a user-friendly shopping portal that will bind the coverage you need in just a few minutes.

So don’t wait any longer. Build client trust by getting E&O insurance today!

Are you a life, health, or property-casualty insurance agent? Do you do investment or financial planning for a fee? Then you know all of these fields can be excellent ways to make a living—both financially and psychologically. But you also know they can be risky. Sometimes insurance or financial professionals do something wrong or fail to do something important. Other times, a client may create a dispute in an attempt to make money or hurt their advisor. In either scenario, getting embroiled in a court battle can turn a satisfying career into a stressful nightmare. And if you lose your case, it can have a devastating impact on your finances.

Enter e and o insurance, otherwise known as E&O coverage or professional liability insurance. With E and O insurance, you can convert a large, unknown, potentially damaging financial loss (a court judgment or settlement) into a known, easily affordable and budgetable expense (E&O insurance premiums). By transferring your risk, you not only will protect your business, but also secure peace of mind. For these reasons, thousands of insurance and investment professionals today buy E&O insurance in order to establish a financial backstop in case they lose a client lawsuit.  Are you among them?

If so, read on for a quick refresher on what E&O coverage is and how it works. If not, consider whether having this form of insurance would benefit you in the event a client decides to take legal action against you . . . and wins.

So what is E&O insurance? It’s simply an agreement between an insurance or investment professional and an insurance company in which the insurer assumes a professional’s liability risks in exchange for receiving a single or periodic premium payment. The purpose of the contract is to generate cash in case a court finds that the professional harmed a customer and must be held financially accountable.

What are the terms of the deal between you and your insurer? The easy answer is that your E&O policy will cover you in the event you make a mistake or neglect to do something that results in a financial loss to a client. The harder answer involves drilling down further and examining the policy’s insuring clause and list of exclusions. Although the latter discussion is beyond the scope of this article, we recommend you carefully read those sections of your policy to see how they define terms such as “insured,” “loss,” “claim,” “wrongful act,” and “professional services” and what losses they will not cover. There are nuances involved in how insurers define these terms. So you want to be sure their contract language syncs with your needs. If not, you may not be protected in the event you get sued in the future.

However, if you operate within the policy’s insuring clause and exclusion list, then you will be fully protected against future lawsuits up to your policy’s limit of liability (example: $1 million). This assumes you pay your premium when it comes due. In the unfortunate case a client sues you, your insurer will then do the following on your behalf:

  • Provide you with an attorney at no additional cost.
  • Assign a company adjuster to investigate and process your claim.
  • Pay your attorney’s retainer fee and additional fees incurred while handling your case.
  • Pay for expert witnesses your attorney deems necessary.
  • Cover arbitration or mediation costs.
  • Pay for any court-related expenses.

For your E&O coverage to work as planned, you must uphold your end of the bargain. This involves paying for your E and O insurance premium on time, never letting your policy lapse, and notifying your insurer promptly at the first sign that a client may file a complaint or lawsuit against you.

Avoiding a lapse is doubly important if you purchased a claims-made E and O insurance policy. That’s because under the terms of a such a policy, the insurer will provide protection for any client dispute or lawsuit that arises and is reported during the policy period. This is true even if the claim resulted from an event that happened many years ago when you had E&O insurance with another company. (Claims-made policies are distinct from occurrence E&O policies. With those, the E&O insurance policy in force when the precipitating incident happened pays the claim, not the one in force when the claim is filed.)

However, there’s an important caveat: You must have maintained continuous E&O coverage over the years. If you canceled your policy, creating a coverage gap, your current claims-made policy will not cover events that occurred prior to the gap.  So if you take nothing else away from this article, let it be this: don’t lapse your E&O insurance policy. Even if you replace it months or years later, you will now have a coverage gap to deal with. This may have dire consequences for your finances if a lawsuit arises from the gap many years from now.

Once you understand how E&O insurance works, the next question is determining from whom to buy it. If you have a large agency and many agents and service staff working for you, or if you engage in complex, risky transactions, you might want to work with an experienced E&O insurance broker. This person will shop your case to multiple markets and return with several insurance quotes for you to consider. Once you select one, you will likely have to submit an insurance application and then wait for days or weeks until the insurer gets back to you with its decision.

Alternatively, if you are a solopreneur and don’t sell risky products (or do risky transactions), you may want to purchase your E&O insurance online from a firm such as EOforLess.com. A pioneer in online insurance sales, EOforLess provides E and O insurance protection for life, health, and property-casualty insurance agents, as well as for registered investment advisors. How to buy from us? You simply visit our website, select the appropriate policy for your license type, complete an application, and provide payment information. You can then bind your coverage and print out proof of insurance within just a few minutes. As a bonus, you will also be enrolled in the National Ethics Association, which provides ancillary benefits such as product discounts and free CE courses. NEA also hosts an online Ethics Center, where you can learn how to protect your firm by adhering to ethical and compliant business practices.

The bottom-line point is this: to sell insurance or investments in today’s litigious world, sensible professionals do business defensively in order to avoid potential E and O insurance claims. Part of this involves developing an ethics policy for your firm and following all pertinent compliance regulations. The other part involves making sure a successful client lawsuit won’t bankrupt you. How? By purchasing comprehensive and affordable E&O insurance. If you’d like to check out your options, please contact EOforLess today.

What Every Advisor Needs to Know about Errors and Omissions Insurance

People new to business often confuse a product’s features with its benefits. For example, if you were to ask a new life insurance agent what the benefits of errors and omissions insurance are, he (or she) might say E&O insurance generates cash to help resolve client lawsuits. But paying for attorney fees, expert witness charges, arbitration or mediation expenses, and settlements or court judgments relates to the mechanics or features of the policy, not to its benefits. To fully understand the true benefits of errors and omissions insurance, you have to consider the five key reasons to own this invaluable form of insurance.

  1. Less financial uncertainty. As we’ve discussed in the past, buying E&O insurance allows you to replace a large, unpredictable risk (e.g.: the chance of getting sued) with a smaller, known expense (a periodic E&O insurance premium). Most financial advisors find that paying for E&O insurance is more tolerable than having a large unknown risk hovering over them.
  2. Easy access to legal advice. In the unfortunate event a client sues you, you must find an attorney to represent you. But how will you know if the person has sufficient expertise with professional liability cases? And how will you assess his or her track record of winning cases such as yours? Plus, since finding a competent attorney is time-consuming, it may distract you from your normal job duties, reducing your revenue in the short term. However, when you have E&O insurance, your insurer will quickly provide you with a vetted attorney who will immediately launch your defense.
  3. Less stress. Until you’ve been sued, you’ll have no idea how upsetting it can be. For one thing, it raises the possibility you’ll be found liable for a large financial settlement or judgment. If you lack liquid assets to cover that expense, you might be looking at selling off assets or even declaring bankruptcy. For another, it raises questions about your competence. As opposing counsel attacks your competence and credibility, it’s hard not to take those claims seriously and to question your abilities. Having E&O coverage means you’ll have a financial backstop in the event you lose your case. This is a huge stress reducer. What’s more, your attorney will work hard to mitigate the attacks made on your professionalism. This will help to preserve your self-confidence and positive attitude once the case is resolved, hopefully in your favor.
  4. Asset preservation. We mentioned the threat of bankruptcy. Well, preserving your assets is likely the most important E&O insurance benefit of all. The prospect of losing everything and/or of having to go deeply into debt to satisfy a court judgment is a horrifying one for most financial advisors. Fortunately, having E&O insurance will prevent these outcomes, assuring your financial viability and providing you with peace of mind.
  5. Client trust-building. Clients want to know that their financial advisors are true professionals. What does this entail? That you maintain a high standard in terms of how you discharge your duties and that you take responsibility for your mistakes. By doing these two things, you will instill trust among your prospects and clients. Purchasing E&O insurance is the best way to take responsibility for your actions because it means you have a mechanism in place to make your clients financially whole in case you cause them financial harm.

Now, should you mention that you have E&O insurance? Perhaps not explicitly. But you can tell clients you are a responsible business owner who maintains comprehensive insurance coverage to protect your business and its clients against financial loss. Knowing this will not only provide a great deal of comfort to them, it will also help you sleep at night.

So if you’re tempted to not buy E&O insurance (or to lapse your existing policy), consider the profound benefits of having errors and omissions insurance protection: less financial uncertainty, ready attorney access, less stress, greater asset preservation, and enhanced client trust. Wouldn’t you rather have those benefits than not? To review your errors and omissions coverage options, visit EOforLess.com today.

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!