Errors and omissions insurance (E&O insurance), also known as professional liability, works to protect businesses from claims regarding mistakes made through offered professional services. A large part of every business, especially insurance agencies, are the employees. Thankfully, E&O insurance covers individual agents who are targeted with a professional liability lawsuit.
Individuals vs. Companies
Companies are generally responsible for purchasing insurance to cover their employees. Insurance providers are no different and should have certain policies in place to protect not only the business itself, but those who keep it running.
When it comes to professional liability, most lawsuits are aimed at a single person. If one insurance agent makes a mistake and causes a client money, that client may then file a lawsuit against their insurance agent. In this case, the agent should still be covered under the agency’s E&O insurance policy. This policy will help with the insurance agent’s legal fees and expenses such as court fees, defense costs, etc.
Individual agents may also choose to carry their own E&O insurance policy. Carrying a personalized policy can cover gaps that the agency’s policy may have while also guaranteeing coverage while the agent is between agencies.
There are two main types of E&O insurance policies: claims made and occurrence. An occurrence policy covers claims depending on when the incident occurred while a claims made policy covers claims that are made while the policy is active. Both of these policies leave insurance agents vulnerable and without coverage depending on when the file is claimed, especially if they leave the original agency where the incident occurred.
How Much is E&O Insurance for Insurance Agencies?
E&O insurance policy premiums vary depending on several factors, including location, industry, number of employees, claims history and more. On average, E&O insurance may cost anywhere between $500 and $1,000 a year per employee. This cost can be cheaper for an individual agent’s personal policy, primarily due to single coverage and lower limits.
Before deciding how much E&O insurance coverage your agency needs, carefully consider the location and claims history of the agency. It’s important to keep agents protected as well as maintain a way to protect the agency’s reputation in the face of a claim. E&O insurance is crucial for all insurance agents and agencies, no matter what the specialty. Go over your company’s policy to make sure your agents are covered.
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