Texas Life and Health Agents E & O Program

Texas Licensing Requirements

Starting a new independent life and health insurance agency.

Preparing your agency for licensing in Texas prior to getting a carrier appointment.

Individual licensing requires quite a few steps including fingerprinting. The license requirements for individual agents can be found on the Texas Department of Insurance Licensing website. Outlined below are some of the details, but licensing requirements can change from time to time, so check out the TDI website or your education provider for details.

Just as a warning, if you have no license to practice insurance, you are personally liable. See Section. 4001.053 titled: PERSONAL LIABILITY FOR ACTING AS AGENT. A person who takes an action listed in Section 4001.051 for or on behalf of an insurer before the insurer complies with the requirements of the laws of this state is personally liable to the holder of any insurance policy with respect to which the action was taken for any loss covered by the insurance policy.

To be licensed as an individual, Sec.4001.105 states you are required as a natural person and

(1) is at least 18 years of age;

(2) has passed the licensing examination required under this code within the past 12 months;

(3) has not committed an act for which a license may be denied under Subchapter C, Chapter 4005; and

(4) has submitted the application, appropriate fees, and any other information required by the department CORPORATE LICENSING If you are a corporation or partnership authorized and formed in the State of Texas, you have additional obligations including financial responsibility requirements under Section 4001.106 entitled: ISSUANCE OF LICENSE TO CORPORATION OR PARTNERSHIP.

(A) In this section, "customer" means a person or firm to which a corporation or partnership sells or attempts to sell an insurance policy or from which a corporation or partnership accepts an application for insurance.

(B) The department shall issue a license to a corporation or partnership if the department determines that:

(1) The corporation or partnership is:

(A) organized under the laws of this state or another state; and

(B) authorized by its articles of incorporation or its partnership agreement to act as an agent.

(2) At least one officer of the corporation or one active partner of the partnership and all other persons performing any acts of an agent on behalf of the corporation or partnership in this state are individually licensed by the department separately from the corporation or partnership.

(3) The corporation or partnership will have the ability to pay any amount up to $25,000 that it might become legally obligated to pay under a claim made against it by a customer and caused by a negligent act, error, or omission of the corporation or partnership or a person for whose acts the corporation or partnership is legally liable in the conduct of its business under this code.

(4) If engaged in the business of insurance, the corporation or partnership intends to be actively engaged in that business as required under Section 4001.104(a).

(5) Each location from which the corporation or partnership will engage in business in this state under authority of a license issued by the department is registered separately with the department.

(6) The corporation or partnership has submitted the application, appropriate fees, and any other information required by the department.

(7) An officer, director, member, manager, partner, or other person who has the right or ability to control the corporation or partnership has not:

(A) had a license suspended or revoked or been the subject of any other disciplinary action by a financial or insurance regulator of this state, another state, or the United States; or

(B) committed an act for which a license may be denied under Subchapter C, Chapter 4005.

(C) A corporation or partnership shall maintain the ability to pay a claim described by Subsection (b)(3) by obtaining:

(8) An errors and omissions policy insuring the corporation or partnership against errors and omissions in at least the amount of $250,000, with a deductible of not more than 10 percent of the full amount of the policy, issued by:

(A) an insurer authorized to engage in the business of insurance in this state; or

(B) if a policy cannot be obtained from an insurer authorized to engage in the business of insurance in this state, a surplus lines insurer under Chapter 981; or

(9) A bond in the principal amount of $25,000 that is:

(A) executed by the corporation or partnership as principal and a surety company authorized to engage in business in this state as surety;

(B) payable to the department for the use and benefit of customers of the corporation or partnership; and (

C) conditioned that the corporation or partnership shall pay any final judgment recovered against it by a customer.

(D) A binding commitment to issue a policy or bond described by Subsection (c) is sufficient in connection with an application for a license.

What Type of Insurance Does My Agency Need?

Professional Liability Insurance helps to protect the owners, the agents, and employees that work for you from claims from negligent acts, errors, or an omission that can lead to claims which can lead to a loss. Loss means damages, settlements, or judgements that you may be legally obligated to pay. Litigation expenses associated with claims include attorney fees and other necessary expenses to defend you or your agency. Arbitration, mediation, settlements, and judgements can be expensive. In order to have carrier appointments, many carriers require limits of $1,000,000 per claim and $1,000,000 aggregate. Professional Liability is usually one of the first coverages you are required to purchase.

E&O Coverage is not the only coverage your agency needs to help protect your assets. Many Life and Health carriers are requiring General Liability and Cyber Liability Insurance. Utica National gives you the opportunity to add coverage by endorsement for Cyber Liability Insurance and Employment Practices. Stand-alone policies are also available.

As a business owner, you still have other coverages that help protect your business from financial harm. All corporations and/or partnerships may need coverage for liability issues calling on clients, or clients visiting your office. Business owner’s policies can cover some or all of the coverages outlined below. General liability helps to protect small business owners from claims of injury, property damage, and negligence related to their business activities. Non-owned and Hired Automobile Liability Insurance can cover bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles (vehicles owned. by others, including vehicles owned by your employees).

Commercial Property Insurance /Equipment/

Workers Compensation can provide wage replacement and medical benefits to employees injured in the course of employment.

Occupational Accident is an alternative method

Employment Practices Liability Coverage may help protect you and your agency from discrimination, termination, unfair compensation, harassment, or other employment related matters. Utica National may be able to offer an endorsement to cover Employment Practices to your agency by completing the EPL Supplement. If coverage is desired, you can also speak to your agent at U.S. E&O Brokers.

Cyber Liability Coverage can help you in reporting a data breach or paying regulatory fines. Coverage under cyber liability policies can include credit monitoring, malware and cyber extortion, network interruption, data from stolen laptops, and media liability exposures. Media liability Coverage for wrongful acts (an act, error, omission, negligent supervision, misstatement or misleading statement by an insured) in connection with material on an internet site owned by the insured or related social media.

Employee Dishonesty Coverage one coverage is overlooked by most agents is theft by dishonest employees. Texas Dishonesty Bond (a surety bond) is available on a per employee basis or a blanket basis in Texas. This bond covers the dishonest acts of an employee that is handling cash or valuable assets. Crime Coverage is another form of protection from employee dishonesty, forgery, or robbery. Unfortunately, with the payment of many payables online, credit card payments to vendors and social engineering, your hard-earned money can be stolen and not returned to you once in the wrong hands.

If coverage is desired for employee dishonesty, you can speak to your agent at U.S. E&O Brokers.

Directors and Officers/Management Professional Liability Insurance

This is Liability Insurance for claims made against directors, officers, or board of directors. It covers claims resulting from poor management decisions which creates financial harm to others for your actions. Contracts with outside parties can lead to disputes and pose legal expenses to defend allegations. If you have a corporation and/or hold multiple corporations including holding companies, you may want to consider getting a quote. If coverage is desired for employee dishonesty, you can speak to your agent at U.S. E&O Brokers.

Buying an Existing Book of Business or a Corporation?

Buying a book of business: If purchasing a book of business, a purchase agreement with the date of sale and indemnification agreements are necessary with a list of policies that are being transferred. Having an attorney involved to draft an agreement or at least review your purchase agreement is a good idea. Issues that can come up in a transfer of assets can include not all carrier appointments being transferred to the new entity. With an asset transfer, the new entity should have coverage in place prior to making the asset purchase. The entity selling the book of business may have E&O in place already and will keep their operation open. If the seller is closing the operation, the new purchaser should require the owner to purchase an Extended Reporting Period (TAIL) to help protect the seller from errors they have made in the past. Past errors from the prior owner, would not be covered under the purchaser’s E&O as the new agent of record of the business was not at fault at the time of the error. Please call U.S. E & O Brokers to get more scenarios on asset only transactions.

Buying an agency: If purchasing an agency, you may have several questions on how to handle purchasing a new E&O policy or getting approval from the current E&O carrier on the transfer of the existing policy. Purchasing an existing entity can lead to legal changes at the Secretary of State, the Texas Department of Insurance, and Carrier notifications. The most important consideration is how you are purchasing the agency. Purchasing the assets and liabilities of the corporation requires an agreement that addresses the indemnification between the parties. Ownership changes between family members or long-time employees are the most common reasons to seek approval from an E&O carrier to approve the transfer of an E&O policy between the parties. Do not wait to get the approval from your E&O carrier in a change of ownership. Many E&O policies have conditions that require notifications of changes in a short period of time. You may jeopardize all E&O coverage by not following the directives of any E&O policy.