Protection from disaster: that’s why most homeowners and most businesses get insurance. When you’re managing an insurance agency, you want to make sure that you’re protected from catastrophes such as floods and fires. However, it’s important to remember the other problems that can plague your business. These problems may not be visibly catastrophic, but when an employee makes a serious error, the financial impact on your business can be profound. E&O insurance acts as protection against these errors.
What do you need to consider before you purchase E&O insurance?
What Does E&O Insurance Cover?
E&O insurance allows you to provide coverage for your business in case an employee error or omission results in real or perceived financial or other damage to a client.
For instance, if your employee forgets to check off all of the boxes on a form and then the client suffers a loss that should have been covered but isn’t, then the client may ask for compensation. While you may have excellent quality control practices in place, errors and omissions still happen, and E&O insurance protects you from the consequences.
Costs for E&O Insurance Can Vary
Just as you would when purchasing any kind of insurance, you should shop around to ensure that you have the best deal. E&O insurance not only depends on your insurance provider, but it also depends on other factors, according to The Hartford. These include:
- Revenue . When you’re working with higher revenues this can involve higher risk.
- Total number of employees. Smaller businesses usually have lower rates.
- Employee training programs. Teaching your employees how to reduce the risk of errors and omissions can result in a lower rate for your E&O insurance.
- Interactions with clients. Depending on how you write your contracts, you can change your liability.
- Claims history. The past E&O claims that you have had influence your future rates.
- Coverage limits. The more coverage you need, the higher the cost of the policy.

Know What Your Insurance Does Not Cover
Just because you purchase E&O insurance does not mean that you are entirely free of worry from errors and omissions. According to Investopedia , “E&O insurance may or may not cover temporary employees, claims stemming from work done before the policy was in force, or claims in various jurisdictions.” If you have many temporary employees, consider how you will manage this risk.
Consider Upgrading Your Training
If you’re looking for lower-cost E&O insurance and fewer E&O claims in the future, consider how you might upgrade your employee training program. Better employee training around data protection and accuracy will help your insurance agency do better at managing client accounts, and it will also help you lower your E&O insurance rates.
E&O Insurance is an Investment
As you consider whether to get E&O insurance and what kind of coverage limit to pursue, know that your E&O insurance is an investment. It’s an investment in the future of your insurance agency. Having E&O insurance allows your business to continue even in the face of a client lawsuit that might otherwise be very challenging for your business.
Instead of looking at E&O insurance as a cost, consider how it is an important investment in your corporate image and security.
E&O Insurance Provides Security for You and Your Clients
E&O insurance is a way to ensure that your clients feel secure coming to your business. While everyone would prefer that your employees do not make mistakes or omissions, clients know that a business that has E&O insurance is a business that is prepared for mistakes if they happen. That way, clients can seek compensation if a mistake were to occur.
At the American Agents Alliance, we’re dedicated to helping you grow your insurance business safely. If you’re looking for E&O insurance for insurance agents, take a look at our discounted E&O insurance packages for members. Contact us today to learn more.