Insurance agents and brokers have a unique opportunity to help customers protect their most valuable assets. Agents and brokers quote and sell policies ranging from personal lines (i.e., homeowners, auto, renters, and life insurance) to business insurance, travel insurance, medical insurance, and so much more.
An insurance agent will have several risk exposures, one of the most prominent risks involving incorrect or misleading information. Providing inaccurate information can cause financial and legal issues for the client and the agent. As a result, insurance coverage for such accidents is essential to protect the business from financial harm.
What Are Some Risks for an Insurance Agent?
An insurance agent is exposed to some of the following risks:
- Providing incorrect, misleading, or inadequate information
- Car accidents
- Loss of important paperwork
- Fire damage to the office and its equipment
Providing Incorrect Information
Arguably, the most significant risk to an insurance agent is giving the client false or misleading information that results in financial losses or legal issues. Clients trust their agent to provide them with sound advice and not to oversell unnecessary insurance. However, claims result from errors, negligence, or leaving out essential coverage, whether intentional or not.
Many agents and brokers work primarily in an office, although some drive. For example, sales agents drive to meet clients and query insurance companies or claims adjusters, which increases the chance of a car accident. Frequency, timing, and familiarity with the location are all factors that influence how likely an accident will happen.
Loss of Important Paperwork
Agents and brokers accumulate contracts, policies, retainers, client documents, and employee records. Fires, theft, accidental loss, and water damage are dangers that can potentially destroy the business’s valuable paperwork.
Faulty wiring, kitchen fires, and dated equipment are common causes of fires that can lead to building and equipment damage. In addition, client paperwork stored onsite increases the fire hazard in the building, especially if the papers are stored in an untidy way. However, the business can greatly reduce the fire risk with good cleaning and storage practices.
What Types of Insurance Should an Insurance Agent Consider?
In many cases, the risk of an accident or claim will be minor; however, when a claim does happen, it can prove costly. The best way to protect your business from financial hardships is with insurance. An agent or broker should consider the following policies:
- Professional liability
- Inland marine
- Property damage
Accidents and mistakes can be costly, so good coverage is essential for any business plan.
Professional Liability Insurance
Professional liability insurance, also called errors and omissions, is normally covered under the same policy as general liability. The difference is that professional liability provides unique protection specific for mistakes and failing to provide a promised service.
In regards to agents, this coverage is particularly significant for their business because a mistake, bad advice, or omitting information can have significant financial repercussions for the client. As an illustration, if the agent advises a client to purchase incorrect coverage and a claim happens, the claim could be denied. This error not only leaves the client with a possibly large financial issue but could also lead to a lawsuit against the agent for negligence.
A professional liability insurance policy covers claims for:
- Faulty advice
- Omitting information
- Providing false or misleading information
- Failing to provide a promised service
Commercial Auto Insurance
A business-owned vehicle needs commercial automobile coverage as it’s not covered under a personal automobile policy. A commercial automobile policy will cover liability, physical damage, medical, and rental reimbursement claims.
Agents without company-owned vehicles will need non-owned auto liability coverage for any personal vehicles used for the business—such as an employee driving to meet new clients. This type of coverage is needed because the business could be held liable if an employee driving their personal car on a sale’s call causes an at-fault accident. Non-owned auto liability insurance protects the company, offering additional liability insurance for bodily injury and property damage claims.
The non-owned auto liability insurance won’t cover damage to the employee’s personal vehicle; but instead, the employee’s personal auto policy will. This non-owned auto liability insurance solely provides the business with an added layer of protection for liability claims resulting from the actions of its employees.
Inland Marine Insurance
An inland marine policy offers protection for important documents held by the business under a line of coverage called valuable papers and records. Agents or brokers accumulate and store various documents that will be challenging and costly to replace if damaged or lost.
Valuable papers and records coverage reimburses the value of the lost documents and offers coverage for the cost of replacing documents. As a note, this policy does not cover electronically stored documents.
An inland marine insurance policy also covers equipment that moves offsite, such as laptops and phones. This equipment is protected under a line of coverage called an equipment floater, which protects company-owned items against losses such as damage, theft, fire, and vandalism.
Property Damage Insurance
Coverage for property damage is especially significant for agents and brokers with office space. This policy offers protection for the agent’s building and equipment from damages such as:
- Water from leaking pipes
However, agents who work out of their homes may already have coverage under a personal home insurance policy. In this case, it is advisable to double-check the coverage limits because sometimes a personal home policy’s limit isn’t enough. If the coverage limit is insufficient, consider adding a business owner’s property damage policy to your portfolio.
How Much Does Insurance Cost for an Insurance Agent?
Insurance costs vary depending on the coverage amounts needed, which are determined by the agent’s level of exposure. For instance, an agent with many clients, vehicles, and employees will have greater exposure to accidents and claims and therefore needs more coverage. In contrast, an agent who works from home doesn’t use a vehicle for business and doesn’t have employees will need a lower level of coverage.
Some key factors influencing the price of insurance agency insurance include:
- Size, type, and number of vehicles to be insured
- Size and condition of office space
- Size, type, and number of mobile equipment
- Number of stored documents and method of storage
- Training, continuing education, and qualifications of the agents and employees
- Current or past lawsuits or claims
Due to the variability in cost, it is best to call an insurance company to receive a personalized quote for an independent insurance agency. Generally, calling multiple companies is the best way to ensure that you receive the policy with the best value.