As an insurance agent, you know better than anyone the importance of having insurance. On a daily basis, you provide advice to your clients that impact their livelihoods, so it’s vital to make sure you and your business are protected with the right policies.
Prior to launching your insurance agency make sure you have commercial insurance in place first. Here are the basics of what you need to run your insurance agency successfully.
General Liability – The basis of all business insurance starts with General Liability. Since you most likely have clients coming to your office sometimes, there is a chance that they could become injured while on the premises. For example, they could trip over a computer cord or slip on a spilled cup of water. Either of these scenarios could cause a fracture and ultimately your agency could be sued for damages. Also, General Liability covers property damage so if you visit clients at their homes to do inspections and damage something of theirs, the General Liability insurance policy will pay for it.
Commercial Property – Depending on whether you rent or own the office you are in the coverage may be different, but you will definitely want a Commercial Property insurance policy. If you own the building then you can insure it here for things like lightning, fire, wind, vandalism, theft, etc. If you rent, then you can just worry about the items you own inside or Business Personal Property. Basically, if you could pick the building up and turn it upside down, anything that could fall out would be considered Business Personal Property. A Commercial Property policy will also allow you to add a very critical coverage called Business Interruption or Business Income. If you have a fire and are unable to keep the doors open while the building is being repaired or replaced you will lose some income. This lost income can be reimbursed with Business Income coverage.
Workers Compensation – Of course, if you have employees you will absolutely need to carry Workers Compensation insurance. When your employees are injured at work, or become ill due to a work-related incident, they may miss work which will cause them to lose out on some wages that they depend on to take care of their family. Not only does Workers Compensation provide coverage for employees’ lost wages, but it will also cover any necessary medical bills for the covered work-related injury or illness. You will also find your Employers’ Liability coverage here. While we don’t see many claims here, it is always a possibility that an employee may claim that you were negligent. You surely want to be protected just in case.
Umbrella – As an insurance agent, you know that a little extra liability never hurts anyone so we highly recommend that you purchase an Umbrella, or Excess Liability, insurance policy. The standard General Liability limit of $1,000,000 per occurrence can be eaten up quickly with one lawsuit depending on the severity of the claim, and if defense costs are inside the limit. Additionally, an Umbrella policy can provide coverage over some gaps that may be in your liability policies. Keep in mind this also can sit over top auto, employer’s liability, D&O, and EPLI if requested.
Cyber Liability – Working in an industry where we depend so highly on technology can be very risky. While it allows us to do our jobs well and efficiently, it can present a significant risk. Even with the best precautions and the most extensive security measures, a network or computer can still be a victim of a Cyberattack or data breach. Be prepared for these dangerous incidents by having Cyber Liability insurance. Not only will it help you to prevent further damages, but Cyber Liability can also often provide coverage for notification services, public relations issues, and even ransomware incidents. Because insurance agents store a lot of sensitive information about customers like social security numbers, dates of birth, drivers’ licenses, and sometimes even payment information it is essential now more than ever to have this great insurance policy.
Employment Practices Liability – Discrimination and harassment are hot button words in the workplace these days and unfortunately, they can be real issues. Working with the public increases the exposure so having Employment Practices Liability is definitely a good idea. You can also find coverage here for wage and hour disputes and wrongful termination. Disgruntled employees can cause major headaches for employers and the insurance industry is no exception.
Arguably the most important insurance policy that an insurance agent should have is Professional Liability, or Errors and Omissions also known as E&O. As you probably already know, Professional Liability is for those businesses that offer professional services. An insurance agency falls into that category. As an insurance agent, you are providing protection to people for some of their most valuable belongings, whether a home, car, business or even life. There is a lot of room for error in the insurance industry when it comes to giving advice or consulting with a customer. An insurance customer will ask you to use your expertise to help guide them to make the best insurance decisions because after all, you are the licensed agent.
Guiding customers through insurance is necessary because it can be confusing due to all of the different language and definitions and forms. When customers ask for your opinion you have to be careful. E&O claims can arise from things like advising them on purchasing a certain coverage amount and it turns out that it is too low. Or, you or an employee could forget to add something to their policy that the customer requested and then a claim gets denied. And, as you are probably aware, if you do certificates of insurance you definitely need E&O insurance as this is a claim that is quickly moving to the top of the list of most expensive. Putting one wrong word on a Certificate of Liability can have dire consequences for your insurance agency. With Professional Liability you will get defense and coverage for any settlements or judgments that are awarded. Even if your agency turns out to be innocent, the defense costs alone to fight this type of claim can certainly break the bank.
A lot of insurance agencies like to specialize in a niche or special type of insurance policy. It is important to be aware that if you are selling a type of insurance that could have big financial hardships if a claim is denied, your limits need to probably be higher than standard. For example, if you are simply selling home and auto insurance, a standard limit on the Professional Liability policy of $1,000,000 may be sufficient. However, if you specialize in something like Medical Malpractice insurance, it is probably a good idea to have a higher limit as the settlement or judgment for a claim involving a medical professional will tend to be higher. Even if you specialize in writing insurance for hotel chains, a catastrophic loss for them could turn into a catastrophic loss for you if it turns out that you or one of your employees made an error. Even with all of the best E&O training that the insurance industry can offer, mistakes happen and you and your employees are only human.
There will be a few times where you may need to consider some other coverages for your insurance agency depending on the type of business you are conducting.
Underwriting Authority – If you decide to work with an insurance carrier that is willing to give you underwriting authority, it is a good idea to take a look at your Professional Liability insurance limit, and determine if you need any bonds. Often, the insurance carrier that you contract with may require you to obtain certain policies or bonds to be able to obtain the underwriting authority. Because you are able to make decisions without first consulting an underwriter at the insurance carrier, your risk is elevated so be sure that your limits are adequate.
Investments – As you grow your agency you may decide that you want to focus on financial products like investments or retirements funds. If you go this route, you will have to obtain an ERISA bond or Crime insurance policy. While Professional Liability is very important here again, managing people’s money is a whole different ball game. Plus, there are many strict laws when it comes to handling financial products, which you will probably learn about when you get licensed to do so.