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Why Insurance Agents Need Errors and Omissions Insurance

Why Insurance Agents Need Errors and Omissions Insurance

Part of building a business is understanding your risks and knowing how to prepare for them effectively. In fact, as an insurance agent this is likely the bulk of your job working with individual clients.


As a business owner, you also need to consider how errors and omissions insurance can help to protect you and your agency, if you have one, against a loss in the event that you or a member of your staff makes an omission or an error. This can involve mistakes that you believe to be relatively simple but the consequences of making these mistakes without errors and omissions insurance can be catastrophic. Small mistakes like missing a waiver of coverage or miscommunicating with your client could lead to serious claims.

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Make Sure To Do Your Research

Mistakes happen in any industry, and the insurance world is certainly not immune to this. Whether the mistake was honest or not, simply being accused of making an error and compromising a client can cost you significantly in terms of reputation or even your livelihood. This is one reason why a growing number of insurance carriers require that an agent maintain errors and omissions insurance, also referred to as E/O insurance.

While not every carrier will have the same requirements, as an agent selling products with multiple companies it’s important to understand that this coverage can be valuable for you even when it’s not mandated

Many different insurance companies offer errors and omissions coverage but it’s important to remember that not every policy is created equally, especially in what the company will cover in the event that your claim goes to court.

Some E&O insurance policies will not pay for your defense expenses like attorney’s fees whereas others will pay for defense expenses but not actual losses. Selecting a comprehensive errors and omissions coverage policy will pay for all of it. Some carriers will also specialize in particular industries so make sure that you evaluate all of your options first.

An agent typically has the opportunity to present numerous different coverage options to client for any form of insurance, but in order to set up to sell policies with any particular carrier, you need to be licensed directly with that carrier. Each carrier usually has their own rules about what’s necessary to be licensed. Your brokerage can help you get set up to sell. Whether or not it’s required by one or more carriers or whether you just want to protect yourself in the event a client alleges a mistake, E/O insurance can be a benefit to your business.

Buying Sooner Rather Than Later Is Strongly Recommended

You probably advise your own clients to buy insurance before they need it to guard against a risk and the same strategy should apply to you selecting E&O coverage. The longer that you go without E&O protection, you expose your staff, your agency and yourself to risk. In fact, an E&O policy will often look back and examine data retroactively to determine whether or not a claim will be covered. You need to be covered early, preferably before you open your doors.

It’s a good idea to have an E&O policy for at least one year after your retirement or termination date in the insurance agency as well because this will protect you from any risk arising from policies written during your last year of business.

Have A Plan For Addressing Claims

Even if you do have E&O insurance, you need a plan for how you will help to prevent omissions and errors as well as mitigate claims if they do arise. Written contracts with clients and signed waivers when clients opt out of coverages that you have strongly recommended. Talking to your clients about potential enhancements and recommendations is also a good rule of thumb. E&O coverage can be critical for helping to protect you from serious risks. Evaluate your E &O coverage on a regular basis so make sure you have the right protection for your needs.

Which Insurance Carriers Require E&O Coverage (And Which Don't) Through TR King Insurance Marketing

Carrier Name

Is E&O Required?

Aetna (AHLIC/ALIC/ACI/CLI/Aenta Conventry)

No

American Amicable (Occidental/Pioneer American/Pioneer Security)

No

American Equity

No

American General (AIG)

Yes

American National Insurance Company (ANICO)

Yes

Americo

Medicare - Yes, FE - No

Assurity

Yes

Atlantic Coast Life Insurance Company

Yes

Baltimore Life

No

Bankers Fidelity

No

Central States of Indemnity (CSI)

No

Central States of Indemnity Life (CSI Life)

No

Cigna

No

Combined

No

Companion

No

Equitable

No

Everest

Yes

EquitTrust

Yes

Foresters

Yes

Gerber Life

Yes

Gerber Life (Medicare)

No

Government Personnel Mutual of Life Insurance Company (GPM)

No

Great Western (GWIC)

No

Guarantee Trust Life (GTL)

No

Heartland

No

Humana

Yes

Independent Assurance Company (IAC)

No

Kemper

Yes

Liberty Bankers (Life)

No

Liberty Bankers (Medicare)

Yes

Lifeshield

Yes

Lumico

No

Manhattan Life

No

Medico

Yes

Mutual of Omaha

No (Yes for some products)

Mutual of Omaha Medicare Advantage

Yes

North American

Yes

Oxford

No

Phoenix Life

Yes

Royal Neighbors of America (RNA)

No

Security Life

No

Sentinel Security Life

Yes

Silverscript

No

Standard Life & Accident (SLAICO)

Yes

Thrivent

Yes

Transamerica (Trans Premier/Monumental/Stronebridge)

No

United Health Care (UHC)

Yes

United Home Life (UHL)

No

Key Takeaways In This Article

  • E&O Insurance is important to your career and business. Don't wait.
  • We strongly suggest that you purchase your own comprehensive E&O coverage. Ask us about our E&O program.
  • No one plans for a claim to actually happen against errors and omissions, they just do.

Over to You

We'd love to hear your thoughts in the comments below on:

  1. Have you or someone you know experienced errors and omissions claims against them, what was the story?
  2. If you believe in selling insurance to protect others, don't you believe you should protect yourself, first?
  3. Do you currently have E&O coverage?

If you have any questions, please leave a comment below. We will carefully read each one of them. Happy Selling!

About the Author Matthew King

Matthew King is a co-owner of TR King Insurance Marketing and partner at Independent Life Insurance Agent Association. When he's not creating processes, content, and developing SEO strategies, he likes to immerse in gaming with his wife and friends.

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