Once you get your insurance license, the next step is to purchase errors and omissions insurance for life insurance agents. It's also sometimes called E&O insurance. In this article, I'm going to talk about why you need to have E&O, how much you need to get as well as where you can get it and how much it cost. For the purposes of this article, I'm going to assume you are a one person shop.
What is E&O Insurance?
E&O insurance is a policy that covers the cost of legal protection in the event you make a mistake and one of your clients sues you for it. These days E&O even offers coverage for reasonable expenses in the case of a data breach of personal identifiable information. As I wrote in my article about employer sponsored identity theft protection, data breaches costs millions every single year.
Why Do I Need It?
A data breach alone is serious business and reason enough to have some E&O protection in the unlikely event it will occur. But as you probably already know, we live in a pretty litigious society and while the risk is low it is a possibility.
In addition to the risk of liability, you are going to need an E&O policy to get appointments with any insurance companies you might want to work with. Most require it these days anyway.
How Much E&O Insurance Do I Need?
Most appointments are going to require a minimum amount of E&O insurance. As I write this, it seems the minimum coverage per act most require is $1 million. You might want to consider getting at least $2 million.
How Much Does E&O Insurance Cost?
The premium for your E&O policy will depend on whether you or not you also sell variable products. If you don't sell variable products and stick to just fixed products like life and health, the annual premium at this time will probably be $600 or $700 dollars for $1 million policy. My friend who also writes variable products and has $5 million in coverage pays about $2500 per year for his at this time.
Where Do I Get E&O Coverage?
For most of my new life and health agents, one option that I give them is AgentEOProgram.com that's offered through Arthur J. Gallagher Risk Management Services as part of NAILBA. You can get $1 million or $2 million of coverage from them and can include variable products if you need that to be included.
They can also get your E&O policy in place pretty quickly which will help you get appointed sooner.
Some insurance companies will have E&O insurance arrangements with certain carriers if you do get appointed to them. Also, if you have a captive insurance agent contract, the contract may have an E&O policy for those that work for them which you might be added to as part of your employment.
But for independent agents, you'll want to get your own policy suited to the risks you face. There are other carriers out there besides the one I mentioned and you should check around. As a side note, I don't receive anything for suggesting the NAILBA sponsored program to you.
Conclusion
In today's world, you need to have errors and omissions insurance to protect yourself as you start to build your agencies book of life insurance business from scratch or if you are already established.
If you have any questions about E&O let me know in the comments. I, and my readers, would be interested in where you got your coverage and how much it costs. Plus, if you've ever had to file a claim and can share what the claim process is like, that might be interesting to hear about.
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