E&O on the fly: Essential buying knowledge for busy advisors, Part 1
Insurance agents, financial planners, and investment advisors are highly skilled at understanding how financial instruments work.
They are accustomed to doing due diligence on a wide range of financial offerings, including life insurance, disability insurance, annuities, and securities of many types. And well they should, since to avoid errors-and-omissions claims, they must be able to match up prospect needs with products that respond to those needs. Unless they are intimately familiar with how their offerings work, they will be unprepared to recommend suitable products to their clients.
However, just like a cobbler’s children often go without shoes (OK, there aren’t many cobblers left in the 21st century, but you get our point), financial professionals often buy errors-and-omissions insurance for themselves without thoroughly knowing its provisions. This is understandable for three reasons:
First, they’ve got plenty of other work to do, which pays the bills, while buying E&O insurance does not.
Second, the need to buy E&O coverage often arises without prior notice (a new FMO or broker-dealer might require it prior to contracting).
Third, renewal dates roll around much sooner than anticipated, catching advisors off guard.
For these three reasons, advisors often find themselves scrambling to buy the coverage they need under severe time constraints, which leads them to make a cursory rather than careful buying decision. And this can result in surprises later when their insurer fails to provide coverage for an excluded loss. To protect yourself, read the specimen policy fully and study its definitions carefully. Even though you’re really busy, the time you spend on this will be time well spent.
Now, we understand that reading a 30-page specimen policy is no one’s idea of great fun (unless you’re an E&O insurance broker). If you can’t bring yourself to read the entire document, focus exclusively on the insuring agreement and the exclusions. In other words, be totally clear on what the policy covers and what it doesn’t before buying it. In the remainder of this article, we’ll provide an initial discussion of the insuring agreement. In Part 2 of this series, we’ll discuss common E&O insurance policy exclusions.
• When you bought your E&O Insurance, was the price of the coverage the main factor in your choice, or were you more concerned with the provisions of the insuring agreement to ensure it does a good job of protecting you? Share your thoughts on this new thread: E&O by price or capability?
Next page: Key elements of the Insuring Agreement
- 20 ways to make clients feel valued
- Autonomous vehicles predicted to radically shrink auto insurance sector, change type, amount of coverage sold
- Premium increases become sticking point for U.S. auto insurance customers, J.D. Power finds
- Company looks to make buying LTCI coverage common by selling through worksite
- CBO: $321 billion reduction in deficit, 22 million more uninsured over next decade with new Senate health bill
- Something to think about on National Insurance Awareness Day: 37% of adults skip life insurance
- Trio of big storm systems lead to 42% drop in 1Q net income for P&C insurers
- MetLife’s individual life, annuity business spin off to Brighthouse clears final regulatory hurdle