Your Agent’s Errors & Omissions limit – an extremely important business decision

No doubt, the goal of your agency is to grow and firmly establish yourself within the communities you serve. Unfortunately, there are some agencies whose dreams were cut short because they were hit with an E&O claim for damages well in excess of their policy limit. If you are an agency that believes that only big agencies can have big E&O claims – actually nothing could be further from the truth.

To ensure that your agency is well protected for the uncertainty of tomorrow, it is prudent to periodically review your E&O limit. In actuality, you really only one have one time of year to conduct this review and to make this key decision: the anniversary of your E&O coverage. For this reason, don’t hesitate to ask the E&O underwriter for options. In fact, ask for both limit and deductible options as a good buying decision could involve taking a higher deductible and using the savings to secure a higher E&O limit. The cost for higher limits is probably less than you think.

When looking at your limit, don’t just look at the per-claim limit; the aggregate (the total amount that the policy would pay out in a given policy year) is also very important. For example, if you were to have limits of $2 million per claim/$2 million aggregate and suffered a $2 million loss (losses of this size definitely do occur), your agency would not have any further coverage available since you had exhausted your limits. For this reason, look to make the aggregate a multiple of the per-claim limit, possibly a 2/4 or a 2/6 limit. This will ensure that if a second claim occurs (yes, some agencies have more than 1 claim in a policy year), your agency will still have limits available.

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