A premium finance company E&O insurance is similar to a variety of other forms of insurance, in that you may not think about it very much until you need it. The truth is that traditional liability insurance for a premium finance company won't cover the entirety of an errors or omissions claim against you (or even the bulk of it.) Fortunately, there are a few questions and steps to take to start figuring out whether or not you need more coverage, and if so, how much additional insurance.
Are You Prepared?
Even if you're required to have this type of insurance, you should likely take a look at your levels even if you are. As with any insurance question, a smart premium finance company owner will have already answered this question with as much detail as possible. While it's impossible to predict every event that may happen, it's fairly common for a finance client to feel as though their chosen finance company made some type of mistake when it came to doling out advice.
This specific type of liability insurance is designed to assist an owner whenever a feels as though they were somehow swindled or otherwise neglected during the course of service. Even a claim that is rooted in a fantasy can be extremely costly if the client is prepared to see it through to the end.
How Often Will You Need Help?
Every financial company has their own style of how they handle their clients, and that style can have a big effect on how often owners see lawsuits against them regarding how situations were handled. For example, a premium finance company that pushes clients to take major risks with their money may garner a reputation for pushing boundaries. The bigger the payoffs, the more likely they are to grow a strong client base. However, the other side of this situation is that when deals go wrong, the client is likely to lose big.
That type of aggressive behavior with investment advice is much more likely to be looked at as an error or omission in the eyes of the client. As a bonus, more premium finance company E&O insurance can make a client feel more comfortable about their future. It shows that their financial advisor as taken precautions, and is thoroughly looking after the details.
How to Look for Coverage
If you think you may be more at risk for a claim or if you feel like you don't have enough coverage, consider how premium finance company E&O insurance may be able to help. It's always the right time to buy insurance before you have a major event occur rather than after. Detailed, air-tight contracts with clients can do a lot when it comes to preventing these types of allegations in the first
place, but not always. The last thing you need is to have a client come to you with a claim, and wondering exactly how you'll handle the incident.
Without knowing for certain that your insurance will be there for you for the next step, it can be a tense time both before, during, and after the claim is filed. Smaller companies especially may not have the resources they need to even begin to cover the fees associated with fighting a claim (or paying it out.) To put it in a different way, it's normal and natural for mistakes to be made when it comes to financial advice. The more you know about how E&O insurance works, the more prepared you'll be.