We all make mistakes. The problem is that some of those mistakes can be costly, especially when they're about something as important as insurance. That's why E&O insurance is necessary.
As an insurance provider, part of your job is to educate your clients. How can you make sure that they avoid making serious mistakes that could cost them time and money down the road? Get to know the most common mistakes that your clients could make.
1. I'll Insure My House for Its Market Value
Depending on the local real estate market, your clients could be overpaying or underpaying for their insurance. According to the Insurance Information Institute, "Insurance is designed to cover the cost of rebuilding, not the sales price of the home." If your clients are in an area with a low housing market, they may not have enough insurance, and if they do have a problem with the home, they might not have enough funds to rebuild.
"Insurance is designed to cover the cost of rebuilding, not the sales price of the home."
2. No Problem, That Renovation is Covered
A new kitchen, a gorgeous bathtub, or a deck that's just right for entertaining: people add to their home over the years to make it feel more comfortable. Will their insurance pay for the renovation? Since insurance covers the cost to rebuild and replace the home, your clients also need to consider what would happen if their renovation were to be damaged. Clients should check with you when they renovate to make sure that the cost of the renovation is covered.
3. I'm Not Worried About a Flood
Since flood insurance is not generally part of your clients' usual insurance package, they need to buy it. However, many of them might choose not to do so. They may not realize that it's not included, or they might decide that they're not at risk. However, according to the Insurance Information Institute, "25 percent of all flood losses occur in low-risk areas." Your clients might not live next to a river, but there can be overland flooding from other sources, such as a burst pipe under the road. Make sure that your clients know what they're declining when they decline flood insurance.
"25 percent of all flood losses occur in low-risk areas."
4. I Don't Need Insurance For That
One of the most common problems that your clients face is the fact that they made the mistake of avoiding insurance. Students who move in as your tenants might think that they don't really own much of value, or they may not realize that the owner's insurance does not cover the tenant's property. Even if you don't think that you own a lot of valuable items, there will still be a cost to replace everything, and this can be very costly if it happens all at once.
5. Deductible? What Deductible?
Your clients' insurance policies have a deductible. This means that if something goes wrong, they need to pay a little bit of money toward resolving that problem. Your clients should understand their insurance deductibles so that they are ready to pay if there is an emergency.
6. Everything Else Gets Older, But My Insurance Needs Are the Same
Are your insurance clients stuck thinking that they're forever young? They may have additional insurance needs now that they're older, or their insurance needs could actually go down. For example, parents with grown children could get a better rate on auto insurance now that young drivers are not using the vehicle. Encourage your clients to do an annual evaluation of their insurance needs so that they don't miss ways to protect their property or save money on insurance.
Are you protected in case you make a mistake? You need E&O insurance for insurance agents to protect your agency in case your employees make an error or omission that causes harm to your clients. At American Agents Alliance, we want to help you support your insurance clients. Visit us and learn more about our membership benefits and join other independent insurance agents at our Alliance Convention.