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Misrepresentation Can Cost You

  • Post category:E&O

As an insurance agent, you deal with clients every day, and even though you think you know your business pretty well, there are many situations that can take even an experienced agent by surprise.  The result: A client files a claim that winds up costing you or your agency a lot of money to settle. That’s why having adequate E&O insurance for insurance agents is so important.

Think it couldn’t happen to you?

Consider the following situation: An agent sold a homeowners policy to a new client, telling the client that the new policy would provide adequate coverage for the client’s home and its contents. When a fire damaged a portion of the home several months later, the client was upset to learn that the policy did not provide coverage for expensive jewelry that wound up being destroyed.

The client alleged that the agent did not inform him about the limits of the policy and filed an errors and omissions claim against the agent. Although the agent said he did let the client know that additional coverage including umbrella options were available, the client maintained that the agent never advised him that he should consider adding more coverage of any type in order to cover the jewelry’s value.

As a result of the client’s claim, the agent was found liable for about $13,500. So what’s the take-home message? When speaking with a client about a new or revised policy, you need to be sure you thoroughly explain what that policy covers, as well as explaining additional policy options that may be of value to the client. In this case, where a homeowners policy was being sold, additional coverage for valuables not covered in the basic policy should be a fairly obvious point to cover.

Why? Because most homeowners mistakenly believe their insurance policies cover more than they do – for instance, coverage for loss of costly items like jewelry, expensive electronics, artwork and antiques. Homeowners also might not be aware of other limitations, such as flood damage coverage or coverage for a home-based business.

In short, when selling a policy, try to think like a homeowner who has no knowledge of insurance, and then make sure you hit all the important points you’d want to know as an untrained person buying a policy. Yes, it’s a time-consuming task. But spending a little time now to make sure you explain all of a policy’s available options can save major headaches that could arise later when a loss occurs that’s not covered by the policy.

Just as importantly, make sure to review your own insurance agency E&O insurance coverage so you don’t wind up facing costly losses in the event of a lawsuit. E&O for insurance agents provides critical coverage so you can manage your business more confidently – and more cost-effectively – every day.

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