Any professional service provider could make a mistake, and that includes insurance agents. If your agency does something wrong, that could cost clients. As a result, they might want to file a claim on your liability insurance. Professional and clerical errors generally have coverage by errors & omissions (E&O) insurance. E&O coverage is essential for most agencies. As an agent, you probably understand this. Still, let’s think about how you can determine the right protection.
Do you have to carry E&O Insurance?
There is no law or rule that requires insurance agencies to carry E&O insurance. However, that doesn’t mean that this coverage is not crucial to an insurance agency’s security.
You see, E&O insurance has another name—professional liability coverage. It protects those who offer professional services, like insurance agents. It exists because, in the course of these services, there’s a chance you could make a mistake. When you do, you could cause personal and financial harm to those whom you serve. It’s there to make up your liabilities to your clients.
How Coverage Helps
Let’s say you prepare an auto policy that you tell a client includes $500,000 liability insurance. However, you accidentally only included $100,000 in coverage. Because of this mistake, the claim a customer tries to file winds up being inadequate. That’s a financial loss for the customer, and a mistake on the part of the insurance agency. You cost a customer protection they thought they had.
As a result, the customer likely can take action against the agency. They might sue you for their losses. If they do, you can use your E&O protection to settle with them for their losses.
How Much Protection You Need
Determining your agency's coverage will depend a lot on the financial risk you face in your work. Many E&O policies can start with around $1 million in maximum coverage. You can generally increase limits to your satisfaction.
Keep in mind, you might have to add enhanced protection to your policy. First, you might need specialty limits to protect niche industry risks. You'll also likely benefit from tail protection. This coverage pays for mistakes that happened while a previous E&O policy was in place. It allows you to claim on that policy, even if it is not the same as your current coverage. Keep in mind, this is not an excuse to let E&O coverage lapse.
So, safeguard yourself against your own professional mistakes. Contact your insurance provider at 800-460-6424 to get appropriate commercial E&O protection.