Your business is small. There are just a few employees, and you all know each other. You may be family or feel like family to each other. In fact, that small business feeling is what draws your customers to you. They enjoy getting to know you and knowing that you're in their community. You feel secure in your business dealings: do you still need E&O insurance?
Even if you're a small, well-connected community insurance business, the answer is yes.
Whether Your Business is Small or Large, Mistakes Happen
Whether you have a handful of clients or thousands, mistakes can happen. Even if you feel like you have a lot of safeguards in place, they could fail – or you could make a mistake that causes a new problem that you hadn't considered yet. If you forget to add key information to an insurance policy and this has an impact on your client's insurance claim, then your business has contributed to your client's misfortune.
An error or omission can be small, but it can cause a serious impact to your client. According to The Balance , "Virtually any business that performs a service or provides advice in exchange for a fee may have a professional liability exposure."
Goodwill Only Goes So Far
Even if you're small and you have an excellent reputation in the community, if you make a mistake, your reputation will only go so far. A sound client relationship may deter your clients from suing you over a small mistake, but if a mistake is large and has a serious impact on a client's business, home, or overall financial stability, then the client may need to seek compensation in order to recover from the error or omission that your insurance company made.
An Error or Omission Can Ruin Your Reputation
While you don't want to consider the possibility that it could occur, it's entirely possible that an error or omission could seriously damage your business's reputation. If you don't have the financial ability to go to court or to compensate people for the damages you have inadvertently caused, then you could cause even more damage to your reputation.
Small Agencies Have Fewer Financial Resources
If you run a small insurance agency, chances are that you may not have a huge ability to manage a large claim against your business. According to the Insurance Journal , "Even if the allegations are found to be groundless, thousands of dollars may be needed to defend the lawsuit. They can bankrupt a smaller company…." If you're just starting out or you work on a thin margin right now, then an errors and omissions claim against you could break your business.
You might think that your general liability insurance will cover your business, but this kind of claim is not generally covered. At American Agents Alliance, we offer many membership benefits to our members. Talk with us about E&O insurance for your small insurance agency: contact us today.