E&O Insurance for Financial Advisors | What Is It? Who Needs It? Why Is It Needed?

e&o insurance for financial advisors

E&O insurance, often referred to as Errors & Omissions insurance or professional liability insurance, safeguards financial advisory firms and their advisors against claims from dissatisfied clients and others who might allege mistakes or wrongful acts that resulted in financial losses. E&O insurance for financial advisors is crucial in protecting against these potential risks.

Regardless of the warnings and statements you’ve made to minimize these types of claims, they still can and do happen. That’s why having the right E&O insurance is crucial to protect you from devastatingly expensive lawsuits.

Why Do Financial Advisors Need E&O Insurance?

As a financial advisor, you are in a position of being a professional. You are offering professional services, advising, and consulting with your clients. Those clients are relying on your training, education, and professional aptitude to do the right job for them.

However, mistakes do happen and errors are made regardless of how careful you are in your business. When a client suffers financial harm due to a mistake or error, they can and will likely sue you to recover their damages.

Defending yourself from these types of lawsuits can be expensive. Hiring an attorney, filing court documents, and doing everything you can to defend yourself is costly. If you settle the case or there’s a judgment against you, that can be off the charts expensive. Without E&O insurance, you’re paying those costs and settlements out of pocket.

This is why financial advisors need E&O insurance.

How Does E&O Insurance for Financial Advisors Differ from General Liability or Business Liability in a BOP Policy?

Good question. General liability, often sold as part of a business owner’s policy (BOP), covers the insured for claims that allege bodily injury, property damage, or personal injury. The common example is the proverbial slip-and-fall claim where a third party is injured and sues you for their medical bills, lost wages, pain, and suffering.

E&O, on the other hand, actually excludes these types of perils and covers you for claims made from the professional services you render to others and potential claims alleging financial harm or damage.

How Do You Get E&O Insurance for Financial Advisors?

This is probably the most important part of this article because I’ve seen too many instances of mistakes being made by financial advisors when they purchase E&O Insurance.

The biggest piece of advice I have is to not purchase this insurance online. There are many insurance agents, digital brokers, and specialty insurers that have so-called simple get-a-quote-in-5-minutes forms online. Simple and fast are great, but too often over-simplification without human interaction leads to very poor results. This is also true of many “association” type programs as well.

I’ve seen policies from these types of providers, and they are full of exclusions, limitations, and problems that are not great for financial advisors or their companies.

I think it makes sense to take a more tailored approach to E&O insurance as well as all the business insurance policies financial advisors need.

You probably feel the same way about the products and services you offer your clients, right? Simple, fast, and cheap are fine until there’s a problem and you find out you don’t have the protection you thought you had.

That’s why working with a skilled broker like The Coyle Group makes sense. We’re going to take the time to listen to your particular situation and craft a protection plan for you that’s tailored to your specific needs. We’re also going to canvass the market to be sure we leave no stone unturned to find the best combination of price and coverage. Unlike a lot of online providers who only use one insurer and a one-size-fits-all policy form.


Here’s the bottom line: you’re a unique professional in the marketplace, and your business insurance should be unique as well. Not a cookie-cutter policy that may not be as broad as it should be for optimal protection. Call or email me and let’s have a conversation to find out what you really need and how we can craft a policy specifically for you. I’d love to hear from you.


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