Insurance agencies are tasked with finding the right insurance policies for their customers. Customers look to agents to explain complex insurance plans, customize insurance policies, and offer the right coverage for their needs. While agencies are focused on ensuring their customers are protected from any liabilities or risks, they also need to look inwards and make sure that their own business has the right safeguards in place.

Insurance agencies face a particular set of risks, given the nature of their work. Agents sell clients on insurance policies that are meant to financially protect their clients in times of need. It could be a customer who has gotten into a car accident, or a client whose home has just burned down in a wildfire. In these stressful situations, customers look to their agents and the policies they purchased for financial assistance, and if something is amiss in their policy or if there is an unexpected gap in coverage, a client may face serious financial consequences. Ultimately, this may turn into a problem for the insurance agency, by way of a lawsuit.

Insurance agencies also face more everyday risks in operating a business. From natural disasters to employee injuries, there are a number of risks that all businesses should consider protecting against. That’s why it’s important to understand what types of insurance coverage your agency may need and how you can successfully protect your business, just as you do your customers.

You should consider purchasing business insurance for your insurance agency business if:

• You would like to insure your services against claims of poor performance or negligence
• You store customer data like financial records or personally identifiable information (PII)
• Regulations require you to purchase business insurance
• You employ others and provide employee benefits like health insurance
• You lease or own your own office building
• You store valuable equipment or property in your office
• Customers or clients visit your office

What insurance coverage do I need as an insurance agent?

Below are some of the most common business insurance coverages insurance agencies should consider, along with a few examples of how these coverages might be applicable to your business.

Professional Liability Insurance

As an insurance professional, you’re well aware that sometimes, unfortunate events and mistakes do happen. Professional Liability Insurance, also known as Errors & Omissions Insurance, can protect you and your business from potential client lawsuits as a result of performance issues or mistakes and errors in your work. If a customer finds that you sold them the wrong policy or that one of your employees filed a claim incorrectly, you could be sued for any financial damages the customer suffered as a result. Professional liability insurance can provide financial protection for you in these cases and cover your legal fees and any judgement or settlement costs.

Examples:

• Errors/Negligence: You sold a customer an auto insurance policy with a $200,000/$400,000/$200,000 limit. Unfortunately, upon processing the order, an employee of yours mistypes the limits and the client ends up with only a $100,000 limit for property damage. Later that month, the customer is involved in an accident with property damage costs of $150,000. He thinks he is covered, but realizes your company processed the incorrect lower limit. He sues your firm.
• Misleading statements: An employee of yours sells a customer on a home insurance policy that he says covers flood damage. The customer purchases the policy, believing that he’d be covered in the event of a flood. An unexpected storm hits the customer’s town, and his house is flooded. Thinking he is covered, he calls in to file a claim, but it turns out his policy actually excludes flood damage. He sues your firm for misleading him.

General Liability Insurance

General Liability Insurance protects your business from lawsuits claiming property damage or bodily injury caused by your business or your employees. If your insurance agency or one of your employees injures a third-party in the course of business, liability insurance can help protect your business against the financial consequences of lawsuits. Third parties include anyone who is not an employee of your business, such as a vendor, customer, or landlord. General liability insurance covers claims from physical injuries or property damage caused by your business. It also covers non-physical injuries such as libel, slander, copyright infringement, or false advertising.

Examples:

• Property Damage: You visit a customer at his home to assess an auto insurance claim. While you are in the customer’s home, you accidentally knock over and damage some expensive sports memorabilia. He sues your company for repair costs.
• Bodily Injury: A customer visits your office for a scheduled meeting and trips over a loose electrical cord in your office lobby. The customer injures his hip as a result and requires medical treatment. He sues your firm for his medical expenses.
• Personal and Advertising Injury: You mistakenly publish a piece of libelous information on a competitor in a local newspaper advertisement. General liability insurance would cover any resulting lawsuit.

Commercial Property Insurance

Commercial Property Insurance helps protect the value of the physical assets your insurance agency owns or leases if that property is damaged or lost due to accidents or disasters. Commercial property insurance covers property such as buildings, equipment, inventory, furniture, artwork, and computers. Commonly covered causes of loss include fire, lightening, wind, hail, explosion, and vandalism. Note that commercial property insurance does not cover any vehicles your company owns. For that coverage, you’ll need commercial auto insurance.

Examples:

• Buildings: A severe hailstorm shatters the skylights in your office lobby.
• Contents: An electrical fire destroys the furniture and computer equipment in your office.
• Property of Others: A printer you borrowed from a neighboring business is destroyed in an office fire.

Additional Coverages

• A Business Owner’s Policy (BOP) combines the major property and liability risks that small businesses face into one convenient package. It also helps you save money, with lower premiums than buying the individual coverages separately. This type of policy usually bundles together general liability, property insurance, and business income insurance into a single policy.
• Workers’ Compensation Insurance, often called Workers’ Comp, is a form of liability insurance that pays out benefits to an employee if he or she suffers a work-related injury or illness. If employees decide to accept these monetary benefits, they agree not to sue your business.
  • Example: An employee of yours suffers a repetitive stress injury from his constant work on the computer. Workers’ comp covers the costs for his rehabilitation and a portion of his lost wages from missing work.
• Cyber Liability Insurance protects your insurance agency from financial losses due to data breaches, hacking, viruses, and other similar cyber events. This type of insurance is particularly important in today’s hyper-connected, digital business environment.
  • Example: Your office network is hacked, and cyber criminals gain access to your customer database. The criminals end up selling the information online, and your customers sue your firm as a result.
• Employment Practices Liability Insurance protects against lawsuits from your employees involving claims of wrongful treatment, such as discrimination or harassment, and covers any judgments or legal fees associated with these claims.
  • Example: An employee of yours suffers a repetitive stress injury at work and files a workers’ comp claim. He takes time some time off to recover, and when he returns to work, he is promptly fired. He sues your company claiming retaliation against him for filing the claim.

Conclusion

As an insurance professional, you’re well aware of the importance of protecting yourself against risk, whether it is purchasing a home or driving a car. Much of your day-to-day job involves helping your customers protect themselves against everyday risk. When it comes to your own business, it’s important you consider safeguarding your business from everyday risks as well. Whether it is a natural disaster that damages your office, or a customer that visits your office and suffers an unexpected injury, having the right insurance protections in place can give your agency the financial cushion it needs to survive and any unfortunate event.

Furthermore, insurance agencies should pay extra attention to the professional liabilities they face. The insurance policies you sell are meant to financially protect your customers, but just one small mistake can mean financial losses for your customers, and lawsuits that arise from professional errors can do serious damage to your business. Make sure you’ve taken a look at all of the different insurance types that could be relevant to your insurance agency and find the right set of policies to protect both your business and your employees.