There is no doubt that the purchase of your E&O coverage is one the most important decisions an Insurance Agent will make during the year. Since no two policies are the same, knowing what to look for and how the coverage works is vital. While the premium is an important consideration, securing a policy strictly based on the premium could result in inferior coverage. This could cause significant hardship (or disaster) for your agency.
As your agency looks to protect your customers, agencies need to be diligent in the pursuit of coverage that will provide them with solid protection. Some key issues to consider are:
– Is the coverage on a “claims made” basis or “claims made and reported”? What is the difference that you need to be aware of.
– Is defense “included as part of the limit of liability” or “in addition to”? If the defense is part of the limit, the defense costs that are incurred could reduce the limit available to pay any judgments.
– Know what your policy covers and what it doesn’t. Don’t hesitate to ask the E&O carrier for a specimen policy and then review it carefully.
– What is the right E&O limit? There is no easy way to answer this question but by evaluating what you do and “what is the worst that could happen” will help you better understand the claims potential of your agency. Don’t hesitate to ask the E&O carrier for options to consider.
– What is the history of the E&O carrier? Are they a leader in the industry? What is their process for handling claims and how well do they perform this task?