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Before Disaster Strikes: Be Clear About Exclusions

  • Post category:E&O

Your insurance clients know what their insurance covers, don’t they? You’d be surprised at home many clients are stunned to learn that their insurance does not cover problems such as overland flooding. Before disaster strikes, you need to make sure that your clients are clear about their insurance coverage and that they secure additional coverage if they require it. That way, you can also avoid lawsuits from clients who believe that you misled them into getting the wrong insurance coverage.


What Clients Believe About Their Insurance Coverage 

Your clients want insurance so that they will feel secure and be financially protected. Unfortunately, they often have specific beliefs about insurance that are untrue, and that can be financially damaging. These beliefs include:

  • All of my rare and valuable items are covered. Depending on the cost of the homeowner’s valuables, they could have more than the limit. You need to make sure that these valuables are actually covered by adequate insurance.
  • Our house has insurance that covers all water damage. In reality, this insurance may only cover flooding caused by plumbing problems and not overland flooding. Overland flooding is a separate insurance policy. Sewer backups may not be included in the customer’s policy either.
  • Our house is insured when we’re on vacation or when we’re away during the winter. According to, a home “may be considered “vacant” or “unoccupied” if it is left empty for 60 or more days.
  • Insurance covers my leaky roof or my damaged foundation. According to CBC, “A home insurance policy is not a maintenance policy,” even though clients may want you to cover their home repairs if they have not properly maintained their building.
  • My new renovations are included in my insurance policy. Depending on the extent and cost of the renovations, those renovations may be far beyond the initial cost quoted for insurance. Homeowners who suffer damage could be very disappointed if they don’t have enough insurance coverage.


Communicating With Your Clients About Insurance Coverage 

To avoid problems for your clients, you’ll need to make sure that they fully understand their insurance coverage.

  • Communicate verbally and in writing, so that clients can reference their insurance coverage.
  • Confirm that clients understand the coverage they have.
  • Be clear about exclusions.
  • Ask clients about their lifestyle and the items that they own so that you can make sure that they get specific coverage for items such as expensive equipment for their hobbies.
  • Ask about additional coverage such as coverage for disasters.


E&O Insurance for Insurance Agents 

No matter how well you communicate with your clients, you need to have E&O insurance for insurance agents. According to the Insurance Information Institute, E&O insurance covers “negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice.” What will E&O insurance do for your business?

  • If you misfile or fail to add a specific type of insurance coverage for a client, and the client thinks their home or business is covered, E&O covers your liability.
  • If you communicate poorly with a client and that person thinks that they’ve covered for specific insurance issues when they are not.
  • If an overenthusiastic new employee oversells a product, and the client is devastated to discover that the damage to their home is not actually covered for a specific problem.

No matter whether you make an unintentional mistake or an overenthusiastic error, your E&O coverage will help protect your business in case a client is dissatisfied.

At American Agents Alliance, we’re here to help you be a strong, thriving, and independent insurance company. Talk to us about our many membership benefits,  and join us at our Alliance Convention to learn more about E&O insurance for insurance agents and other insurance industry issues.

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