Starting a business is a scary process that takes a lot of money and time. Many entrepreneurs go into business for themselves because they want to be able to help people. Some become doctors, lawyers, social workers, and writers. However, some extra special entrepreneurs decide to go into the insurance industry.
Insurance is a booming business that will never go away. It is a great profession to get into if you enjoy helping people. With the number of risks we all face in the world, your client base will almost always continue to grow. Additionally, there are so many insurance companies out there and they are all different so customers need agents like you to help decipher the language and determine what is best for them. While risk means you will make a lot of profit helping people, it also means you are at risk yourself.
Because you are in the business of providing advice and managing risk for people and their businesses, you have an exposure yourself. Taking your own advice that you give your clients, managing your risk and protecting your finances, is even more critical the more your insurance agency grows. More customers mean more profit, but also more risk for you and your business. The good news is that there are many types of insurance policies available to protect your insurance agency, and one of the most critical is Professional Liability.
Professional Liability insurance, also referred to as Errors & Omissions or E&O, is one of the most important insurance policies for anyone in a professional service industry, but especially insurance. A professional service will be defined in each Professional Liability policy, but generally means providing services for a fee. Professions like doctors, lawyers, therapists, and architects are just some other examples of industries that would benefit from having a Professional Liability policy.
Negligence – As a business owner you surely have policies and procedures in place to help you and your employees to complete work without missing any steps. Unfortunately, mistakes happen and we are all human. In the insurance industry though, a small mistake can turn into a huge problem for an insurance agent if there is a financial hardship for the customer. For example, if a client calls in to add a vehicle and your employee is so busy, they forget to do so and the client is in an accident, the carrier may deny the claim since the vehicle is not on the policy. As the agent of record, you will be sued by the customer and as a new agent, you probably won’t have the disposable income to just pay for it out of pocket.
Defense Costs – There are times where even the court costs and lawyer fees can cost more money than the claim itself. In the case of the forgotten vehicle, if you are sued you will have to go to court and try to defend yourself. Attorney’s are not getting any cheaper and the courts will always charge you fees for their time. Luckily, Professional Liability insurance will pay for the defense costs for the claim. Be sure to read your policy, as you probably tell all of your clients, to make sure that you have enough coverage. Some Professional Liability policies will give you defense costs outside the liability limit, while some are within. You don’t want to be left with a huge chunk to pay out of your own pocket, as these fees can add up to tens, if not hundreds, of thousands of dollars. This would certainly be enough to put you out of business.
General Liability insurance is another policy that you should have, and while it may sound like it would cover ALL liability it does not. Your Errors & Omissions or Professional Liability is not covered so you need to be sure to purchase this critical policy separately. There are so many scenarios that can arise in which you would need to have Professional Liability insurance. Someone who is not yet licensed in your office offers advice – As you know, you have to be licensed in order to be able to discuss coverages with customers. If an employee who is not yet licensed decides to answer a question and the client takes the answer and something happens that contradicts the answer, you will be on the hook for any damages.
Wrong address – If you or your employee put the wrong address on a policy, if a claim arises the company could deny the claim since the right information was not on the policy. Even a small error such as a typo in an address, vehicle identification number, name, date of birth, or even coverage amount could have dire consequences.
Underinsured – One thing that insurance agents struggle with is coverage amounts. Often, the customer is relying on the agent to tell them what they think they should have, especially when it comes to their property. If you advise a customer on how much you think their home should be insured for and it turns out to be underinsured, that could present a real problem. Clients are depending on you to make sure they are put back whole again at the time of a loss.
Documentation – You probably already know, even if you are new in the industry, how essential documentation is in insurance. You can’t say it enough to your employees, because without documentation you will have no defense if a claim does arise. A missing email, or not writing notes about a phone call, have historically put insurance agents out of business. Also, making sure any documentation sent to the client is accurate is imperative.
Certificates – If you work with the commercial lines sector of insurance, you may understand that certificates of insurance are rapidly becoming one of the top issues for agents when it comes to their Professional Liability. Even though they have a disclaimer on them, courts have continuously upheld them when a lawsuit is brought to light. Make sure to always update training on certificates with yourself and your staff and confirm that your Professional Liability insurance limits are adequate.
Part of the industry – Guess what? Sometimes clients can say you or your employees made an error when you actually did not. This is just part of the business of insurance. Even if you never make a mistake, it is likely that you will experience an Errors & Omissions claim. If this is the case, it will cost you money because you will have to defend yourself in court, and it would be best to use a lawyer. Even if you only ever use the defense costs portion of the Professional Liability insurance policy, it can be the difference between you having a prosperous business or going bankrupt and closing.
We have talked a lot about mistakes employees make because often this is what is seen when it comes to insurance agencies. However, some agents are looking to be freelancers and not have employees. So, if you are a sole proprietor without any employees or plans to have any, you may wonder if you even need insurance. Employees are not the only people who make mistakes or can be sued. Regardless of whether you are a sole proprietor, limited liability corporation, limited partnership, or even a corporation your risk for being sued by an unhappy client is still the same.
Even though you may think that if it is just you working and that means you only have to worry about yourself, it is important to remember that you are still human. You can try your best to never make a mistake, but the reality is that it can happen to anyone. With technology being so prevalent in the insurance industry, that can open you up for error as well. If your internet disconnects in the middle of changing policy and you forget to go back and finish, this is a huge mistake that would not be intentional. Unfortunately, a mistake on a customer’s insurance policy does not have to be intentional for you to be liable to fix it.
It is also important to note that as an insurance agent you will have contracts with whatever insurance carriers you decide to write for. It is more likely than not that the contract they present will require you to carry insurance, and you can bet that Professional Liability will be one of the policies they want to make sure you have. Also, if your potential clients know you have this type of policy that also protects them financially, they will be more likely to do business with you. Not all insurance agents will be responsible enough to carry Professional Liability, so it can give you an edge over your competitors.
Protect your insurance agency by purchasing Professional Liability insurance online from CoverWallet today.