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Trusted Life Agents Have E&O Insurance

There are two reasons life agents should carry E&O insurance. The first has to do with them. The second has to do with their clients. Let’s take a closer look at each perspective.

Life Agents Buy E&O Insurance for Themselves

The reason life agents buy E&O for themselves is because what they do for a living is inherently risky. Think about it. Every day you help clients deal with complex financial matters involving potentially tens of thousands or even hundreds of thousands of dollars. In fact, when an affluent client buys life insurance to fund an estate transfer, literally millions of dollars can be on the line. Making a mistake or forgetting to do something that botches such a transaction can leave you susceptible to potentially career-ending lawsuits.

Another reason life agents need E&O for themselves is because they often work with older clients who may have cognitive impairments. Such clients may authorize a purchase that their children find unsuitable. When this happens, the clients’ beneficiaries, who often stand to inherit large estates, are not shy about making their views known. Worse, if they think the agent took advantage of their ailing parent, they will not hesitate to file regulator complaints or even sue a life agents.

And let’s not forget today’s unsettled regulatory environment, especially around the U.S. Department of Labor’s Fiduciary Rule. Although the rule went partially into effect on June 9, 2017, it might still be revised, watered down, or cancelled prior to its full effective date on January 1, 2018. Until then, life agents who sell retirement products will be expected to serve a client’s best interests. And if they don’t, they run the risk of clients and their attorneys suing them for breach of fiduciary duty.

Finally, let’s not forget that many life agents work in home-based offices, either for themselves or for a life insurance agency. In either case, they may lack dedicated administrative support. This means they have to handle all their own paperwork, including the filling out and filing of life insurance applications. Because sales, not paperwork, is their forte, life agents who work alone may make mistakes that create E&O liability risks

Put the above factors together and what do you have? A compelling reason for you to buy E&O insurance to mitigate your business risks. But equally important is the need to buy E&O insurance for your clients’ sake.

Life Agents Buy E&O Insurance for Their Clients

Although it’s human nature to assume one will never make a mistake, the fact of the matter is mistakes happen, even to the most experienced life agents. And if the worst comes to pass, ethical life agents realize the importance of both protecting their businesses against legal claims and making their clients whole financially. They are rewarded for this because people would rather do business with agents who take responsibility for their mistakes rather than those who shirk responsibility in order to save money.

In short, life agents who wish to build and maintain a sustainable practice know they must always be selfish and selfless when it comes to E&O insurance. They must protect their own financial interests so they can continue to work in their business, while at the same time being responsible for any harm they cause to their clients. The beauty of E&O insurance is that it allows life agents to cover both bases for a reasonable cost, for as long as they keep their E&O policy in force.

In today’s busy, stressful world, any product that helps the seller and the served as powerfully as E&O insurance does is a product worth having, especially if it builds trust as well.

So here’s the bottom line. Are you in the market to buy E&O insurance for the first time or looking for an alternative to your current E&O coverage? Then consider the benefits of buying from EOforLess, an online source of affordable and convenient E&O since 2008. EOforLess specializes in meeting the needs of life agents with quality protection at a low cost, making it a huge win-win for both them and the clients who trust them.

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Top Three Ways Life/Health Agents Get into E&O Trouble

The vast majority of life and health insurance agents are ethical, compliant with industry regulations, and have meticulous business practices. But even the best agents make mistakes, and when this happens, lawsuits often follow.

What are the top three mistakes life and health insurance agents make? Let’s count them down. According to the National Association of Insurance and Financial Advisors (NAIFA), the most common errors that lead to E&O claims include:

  • Misrepresentation. For example, an agent claims a product has a feature it doesn’t actually have. For example, an advisor claims an elderly client can purchase an annuity but get all of his premium back at any time. This misrepresents the surrender-penalty provision, because the person would have to wait seven years to access his money without penalty.
  • Failure to provide. A host of issues might prevent an insured from receiving an expected benefit. For example, a customer requests a review of life insurance needs as part of comprehensive financial planning. While the advisor works on other issues, the client dies, leaving her spouse woefully uninsured. The spouse ends up suing the advisor because he expected to receive a large death benefit when his wife died.
  • Failure to explain. Here, an agent sells a policy or rider, but fails to adequately explain how it works. Case in point: a client likes the idea of combining life insurance and long-term care protection in one contract. So he decides to purchase a hybrid life/LTC policy that provides cash in the event he needs to enter a nursing home. The policy, in effect, pays an early “death benefit” if he can no longer care for himself. When the client develops a chronic, disabling illness and must enter a facility, he begins receiving benefits under the policy, but dies two years later. His wife files a death claim, but learns her payment will be much lower than expected because of the prior payments. She claims to never have heard of this and files suit against the insurer and advisor. This is a classic “failure to explain” situation, since the agent either failed to describe the policy’s features or explained them so poorly the wife had no idea what her husband purchased.

So there you have it: the top three most common E&O mistakes. But there are many other mistakes that trip up life/health agents, including:

  • Selling an unsuitable product to a prospect.
  • Botching a client’s policy-change request, resulting in lower or non-existent benefits.
  • Making clerical errors that result in lapsed coverage and non-payment of benefits at claim time.
  • Sloppily handling life insurance policy applications, resulting in medical conditions not being disclosed to the insurer (and benefits denied at claim time)
  • Advising a client to replace a life insurance policy without explaining that this will reset the two-year contestability period, which in turn results in claim denial similar to the prior scenario.

In short, the common theme behind most E&O insurance disputes is customers failing to receive the benefits they expected, either because the agent processed the business incorrectly, failed to explain contract features, or deliberately misrepresented contract features. Put another way, whenever there’s a gap between expectation and reality in a client’s mind, the risk of getting sued is high.

How E&O Insurance Protects You from Mistakes

As you can imagine, any one of the mistakes just discussed could lead to a five- or six-figure legal judgment. Based on your personal financial resources, losing in court could wipe you out financially, jeopardizing your ability to pay for your children’s education or adequately funding your own retirement.

Faced with such risks, many agents elect to put their heads in the sand. They figure they’ll never make a mistake or that if they do, their clients will forgive them. Clearly, this is flawed logic, since being human means you’re not perfect. Mistakes come with the territory. And since clients are also human, forgiveness may not come as naturally to them as vengeance does.

The better approach is to protect yourself with E&O insurance. But not just any E&O policy . . . one that’s:

  1. Affordable and comprehensive,
  2. Designed specifically for your license type,
  3. Provided by an A rated insurer, and
  4. Easy and convenient to buy from an online platform such as EOforLess.com.

In summary, life and health insurance agents should strive to avoid the most common E&O mistakes, but also prepare themselves should they end up making one. The best solution: purchase high-quality E&O insurance from a marketing firm, insurer, and administrator they trust. To get started, please visit EOforLess.com today.

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Required E&O Insurance for Life Agents

It’s a truism today that E&O insurance is required for life agents. But let’s explore this notion a bit further. Where does this requirement come from and how important is it for agents to have E&O insurance to protect their businesses?

Let’s start with the fact that working as a life insurance agent is a fundamentally risky proposition. Why? First, life agents often deal with high-value insurance purchases, often designed to fund estate transfers between generations or to facilitate a surviving business partner buying the ownership share of a deceased partner. Such transactions can literally be worth millions of dollars. So it’s not surprising that a life agent’s mistake in setting up these specialized deals can result in substantial client losses and ultimately large E&O insurance judgments. Even smaller life insurance sales to middle-income clients can go awry, leading unhappy clients to file suit and demand restitution.

A second factor is that life agents often serve parents who make financial decisions that displease their children. Or they might have cognitive impairments that lead their children to second-guess their parents’ decisions. In either case, a life agent’s recommendations can lead the second generation to bring legal action against agents. The court battles that  ensue aren’t pretty to watch.

A third is that the current legal and regulatory environment is in flux. With ongoing questions about whether agents in the retirement arena are or aren’t fiduciaries, attorneys will likely be looking for test cases in which they can pin liability on agents who they believe violated their fiduciary duty to their clients.

A final factor is that more agents are setting up their own shops or are working in agencies with less administrative support than ever before. This means they are often required to fill out their own paperwork. Sadly, since agents are better at sales than at administration, they often make sloppy mistakes that can lead to delays in coverage or other problems that harm clients financially. In many cases, when clients lose money, they often turn to the courts for restitution.

Add these factors together and you can understand why E&O insurance for life agents is a requirement today. Because the risks are so large, a responsible agent must protect him or herself against the possibility of getting sued, which can lead to settlements and judgments larger than their total net worth. Without insurance, agents are left with only one option: declare bankruptcy and deal with the life-changing consequences of that decision.

Meeting Your Business Partners’ E&O Requirements

But this addresses only one side of the E&O requirement. The other is the expectations and needs of a life agent’s business partners: insurance carriers, field marketing organizations (FMOs), insurance marketing organizations (IMOs), and managing general agents (MGAs). Each of these recognizes that selling insurance can be risky. So they want to make sure that every agent they appoint has responsible business practices, which includes having high-quality E&O insurance. But they also have a more selfish concern. They want to be sure that clients who’ve suffered a financial loss at the hands of one of their appointed agents don’t seek redress from them rather than from the writing agent. Not surprisingly, as a result, they mandate that all their life agents have E&O insurance to prevent losses from migrating upstream to their “big pockets”.

Consequently, with E&O insurance for life agents becoming a requirement instead of a luxury today, it’s important to purchase and keep in force a good E&O insurance policy that addresses the risks posed by the products they sell. It should also be offered by a high-quality underwriter and supported by a professional administration firm that will provide service after the sale. Finally, they should strive to find an E&O provider that delivers value-added benefits such as free ethics/compliance guidance, free CE courses, free branding tools to increase trust-building in the sales process, and discounts on the purchase of hundreds of products and services for their businesses.

There are many sources in the marketplace today for E&O insurance for life agents. But none that puts all the above pieces together like National Ethics Association-sponsored EOforLess. By visiting EOforLess.com, you can find E&O insurance customized to your specific business practices. Once you’ve made your selection, you can then enroll, apply, and bind you policy in just a few minutes.

Thanks to the power of technology and EOforLess’ innovative process design, life agents can satisfy all their E&O requirements in literally five minutes or less. With this crucial task out of the way, they can focus on doing what they do best—finding prospects for life insurance, assessing client needs, and recommending appropriate solutions. Most importantly, they can go about their business with the knowledge that a litigious client won’t take everything they’ve worked so hard for in a court settlement.

In summary, if you like to sleep well at night, don’t put off buying E&O insurance. It literally can save your business . . . and keep your personal finances intact if you lose a big court battle. Good luck!

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