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

E&O insurance for financial planners

E&O insurance for financial planners, also known as Errors & Omissions insurance or professional liability insurance, protects financial planning firms and their planners from claims made by disgruntled clients or others alleging an error or wrongful act that caused them financial harm.

Despite the precautions and disclaimers you’ve provided to mitigate these types of claims, they can still occur. This is why purchasing the right E&O insurance is crucial to protect you from financially crippling lawsuits.

Why Do Financial Planners Need E&O Insurance?

As a financial planner, you occupy a professional role. You offer professional services, advising, and consulting with your clients, who depend on your education, training, and professional acumen to make the right decisions for them.

However, mistakes can happen and errors can be made, no matter how diligent you are in your operations. When a client suffers financial harm due to a mistake or oversight, they can and likely will sue you to recover their losses.

Defending against such lawsuits can be costly. Hiring lawyers, filing court documents, and mounting a defense is expensive, and if you settle or lose the case, the costs could be astronomical. Without E&O insurance, these expenses come out of your pocket.

This is why financial planners need E&O insurance.

How Does E&O Insurance Differ from General Liability?

e&o insurance for financial planners

That’s a great question. General liability, often included in a business owners or BOP policy, covers the insured for claims alleging bodily injury, property damage, or personal injury. A classic example is the so-called slip and fall claim, where a third party is injured and sues for their medical bills, lost wages, and pain and suffering.

E&O, conversely, specifically excludes these types of claims and instead provides coverage for claims arising from the professional services you render, particularly those alleging financial harm or damage.

How Do Financial Planners Get E&O Insurance?

This is arguably the most critical part of this article, as I’ve seen numerous errors made by financial planners when acquiring E&O Insurance.

My primary advice is to avoid purchasing this insurance online. There are many insurance agents, digital brokers, and specialty insurers offering seemingly simple online quote forms promising a quote in 5 minutes. While simplicity and speed are appealing, the lack of human interaction often leads to suboptimal outcomes. This holds true for many “association” programs as well.

I’ve reviewed policies from these providers, and they often contain exclusions, limitations, and issues not favorable for financial planners or their firms.

A more customized approach to E&O insurance for financial planners, as well as all business insurance financial planners require, makes sense.

You likely advocate for the same personalized attention for the products and services you provide your clients, right?

Simple, fast, and inexpensive are acceptable until a problem arises and you discover your coverage is lacking. This is why partnering with a skilled broker like The Coyle Group is beneficial. We dedicate time to understand your unique situation and develop a protection plan that meets your specific needs. We also search the market thoroughly to ensure the best blend of price and coverage. Unlike many online options that rely on a single insurer and a one-size-fits-all policy.

In essence, as a distinctive professional in the marketplace, your business insurance should be as individualized as you are. Not a generic policy that might not offer the comprehensive protection you require for optimal security. Call or email me to start a conversation about your real needs and how we can tailor a policy just for you. I’m eager to connect with you.

Thank you!

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