Nowadays, customer demands continue to rise at an all-time high. These demands can range anywhere from reasonable requests to outright outlandish orders. Companies clamor to make sure they have the correct errors and omissions coverage to protect themselves against unhappy clients and unjust claims.
The most crucial insurance policy any agency can purchase is the errors and omissions insurance. This policy is designed to protect companies against faulty claims, liabilities, and angry clients. If you are new to the industry, this article is for you.
Here’s everything an insurance agent should know about errors and omissions insurance.
What are Errors and Omissions Insurance?
A type of professional liability insurance, E&O protects professionals, companies, and their employees against faulty claims of negligent actions or inadequate work. Businesses must be diligent about best practices at every level of the company to prevent going through E&O claims.
The errors and omissions insurance typically cover both court costs and settlements within the amount specified by your insurance contract. Businesses and professionals in the advice-giving or service-providing industries are required to have this liability insurance.
As an insurance agent, you need to have this kind of insurance coverage. Your job is to advise people about their selves, their finances, and investments. A misunderstanding or miscommunication between the two of you could easily result in loss of profit or, worse, a lawsuit.
In comparison, against your usual general liability insurance policy, the E&O insurance provides more in-depth coverage. This type of insurance covers more than just property damage, bodily injury, advertising injury, and personal injury claims. It also includes coverage against mistakes made on an insurance policy or a claim.
E&O Coverage and Who it’s For
This type of insurance protects professionals and entities that provide advice or a service such as a financial adviser, consultant, lawyer, or insurance agent. Company investors and regulatory bodies, such as the Financial Industry Regulatory Authority (FINRA), are required to have E&O insurance.
Other professionals who may obtain an errors and omissions insurance include registered investment advisors, insurance dealers, insurance brokers, and other financial professionals.
Businesses outside the financial industry could also avail of E&O insurance. These include general maintenance companies and contractors, nonprofits, and engineering firms. Wedding planners, printers, and any other entity providing services also need E&O insurance.
When it comes to insurance, products are similar but not the same. There may be coverage gaps when customers switch carriers, which can be risky when it comes to an agency’s E&O. You can never be too careful concerning insurance policies.
Despite having E&O coverage, you still need to prepare against claims of errors and omissions and how you will mitigate them if and when they occur. Compile your client’s written contracts and get signed waivers when they decline the coverages you have recommended for them. Regularly communicate with your clients about any changes to their policies.
An errors and omissions coverage helps protect a business against substantial financial losses, even to the point of bankruptcy, depending on the company’s finances.