Choosing The Best Errors & Omission Insurance (E&O): The Complete Guide
As an insurance agent, you navigate a lot of risks every day. You are expected to have extensive knowledge about the products you sell and deliver accurate advice to your clients. Even with the best intentions, things can go wrong. That’s where errors and omissions (E&O) insurance comes in.
E&O insurance is designed to protect insurance agents and agencies from the financial fallout of mistakes made in the course of doing business. This makes it an essential piece of your business insurance portfolio.
In this guide, we’ll cover everything you need to know about the best errors and omission insurance for insurance agents.
What is E&O insurance?
E&O insurance is a type of professional liability insurance. It protects businesses from the financial consequences of errors or omissions made in the course of doing business. The best E&O insurance for insurance agents protects them against liability.
A liability claim can come from an unhappy client, a regulatory board, or even a former employee. In legal terms, it is known as a civil wrong or a tort and occurs when one company or individual suffers a loss or injury because of the actions of another company or individual. The court may punish the accused company or individual by ordering them to pay damages.
E&O policies can provide coverage for the following:
Negligence
This is when an insurance agent or agency is accused of failing to provide the level of care that a reasonable person would expect.
Strict liability
This is when an insurance agent or agency can be held responsible for damages even if they were not at fault or have any criminal intent.
Breach of contract
When an insurance agent or agency fails to live up to the terms of a contract is called a breach of contract.
Negligence per se
Negligence per se is when an insurance agent or agency is held liable because their actions violated a statute or regulation.
What Coverage Can Errors & Omissions Insurance Provide For Insurance Agents and Agencies?
Errors and omissions insurance can provide coverage for a variety of risks, including:
Negligence
Negligence includes any act or omission that results in injury or damage. It can also include financial losses suffered by a client as a result of your advice.
This can easily arise as insurance agents are expected to have a high level of knowledge about the products they sell and give accurate advice to their clients. If you make a mistake or omission in your advice, you can be held liable for the damages.
Errors & Omissions
An error is a mistake that was made unintentionally. An omission is when you fail to do something that you should have done.
Both errors and omissions can result in liability if they cause injury or damage.
Inaccurate Advice
This is when an insurance agent gives inaccurate advice to a client, which results in a loss. Unfortunately, inaccurate advice is a frequent source of E&O claims. For example, if you recommend a policy with coverage that is insufficient for the client’s needs, you can be held liable for any resulting damages.
Misrepresentation
This is when an insurance agent makes a false statement to a client. It can also include failing to disclose important information. Misrepresentation can be verbal or written.
For example, let’s say you recommend a health insurance policy to a client and fail to mention that it doesn’t cover pre-existing conditions. If the client suffers an injury or illness that is not covered, you could be held liable for any resulting damages.
Factors That Affect The Price Of an E&O Policy
Several factors can affect the price of an E&O policy, including:
Industry
Depending on your industry, you may be considered a higher risk and thus pay a higher premium. For example, if you are an insurance agent who specializes in selling life insurance, you will be considered at higher risk than an agent who sells property and casualty insurance.
Company Size and Revenue
Larger companies and those with higher revenues are typically considered a higher risk and thus pay higher premiums. Due to having more employees and customers, they have a greater chance of being sued.
Experience
More experienced insurance agents are typically considered lower risk and thus pay lower premiums. This is because they have a better understanding of the products they sell and are less likely to make mistakes.
Business Location
The location of your business can also affect your E&O premium. For example, if you are located in an area with a high number of lawsuits, you will likely pay a higher premium.
Coverage Limits and Deductibles
The amount of coverage you purchase and your deductible will also affect the price of your E&O policy. The higher the coverage limits and the lower the deductible, the higher the premium will be.
Claims History
If you have had any previous E&O claims, you will likely pay a higher premium. This is because you are considered a higher risk to the insurance company.
Finding The Best Errors and Omission Insurance
Now that you know what E&O insurance is and the factors that affect the price of a policy, you can start shopping around for the best error and omission insurance for your business.
When comparing policies, be sure to look at the coverage limits, deductibles, and premium costs. You should also consider the reputation of the insurance company and its claims history.
You can get quotes from different insurance companies by visiting their websites or contacting them directly.
Once you have a few quotes, you can compare the policies to find the best one for your business.
The Best Resources for Insurance Agents
The best E&O insurance for insurance agents is cruical. It can protect you from liability in the event that you make a mistake or give inaccurate advice to a client.
There are several factors that can affect the price of an E&O policy, including your industry, company size and revenue, experience, business location, and claims history.
When shopping for an E&O policy, be sure to compare all of the factors mentioned above. You can get quotes from different insurance companies by visiting their websites or contacting them directly.
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