Errors and omissions insurance is professional liability coverage. It’s commonly abbreviated as E&O, but you may hear it called professional liability insurance (PLI) or professional indemnity insurance (PII). Regardless of the term being used, it’s important.
E&O protects financial professionals against claims of negligence – from any errors or omissions that they make in the course of serving their clients. If such a claim is made, E&O can cover settlements and judgements as well as court costs.
Why is errors and omissions coverage essential?
Even careful, responsible agents benefit from the protection offered by E&O.
Imagine you’re helping a client with retirement planning. The client decides on a risky investment, loses money and then blames you. Or imagine you sell insurance coverage to a client who later has a claim that is not covered, and the client blames you for the coverage gap. Maybe a client misses a deadline, resulting in financial loss – once again, the blame is placed on you.
You don’t even need to have made a mistake. Let’s say you told the client about the key deadline, but the client misunderstood. Or you notified the client of the risk or coverage gap and offered alternative products to protect the client, but the client turned down the products. Now the worst has happened, and the client decides to sue you. You may or may not be able to prove your diligence. Regardless of whether you win the lawsuit, the court costs can become a significant financial burden.
Mistakes happen. Lawsuits happen. Both legitimate and unfounded claims can have a negative impact on a person’s career. This is why insurance agents and other financial professionals need errors and omissions insurance.
What should agents and financial planners do?
Some companies, clients and regulatory bodies require E&O. Even if you are not required to carry the coverage, it’s a smart move to protect yourself and your career.
If you don’t have errors and omissions coverage, look into getting it immediately. Don’t wait until a client accuses you of negligence; by then, it will be too late to obtain coverage.
Fortunately, agents who are contracted with PTT Financial are eligible to receive free E&O coverage. Click here to request insurance.
