E&O Facts, Figures & Definitions

What is Errors & Omissions (E&O) Insurance?
What does E&O Insurance typically cover?
Do I really need E&O Insurance?
Components of an E&O Insurance Policy
What is a Claims Made Policy?
What is the Retroactive Date of Inception (RDI)?
What is an Extended Reporting Period (ERP)?
Avoiding gaps in coverage

What is errors and omissions (E & O) insurance?

E&O insurance is a specific form of professional liability insurance written for many professions including mortgage lenders, real estate agents, business consultants and other professionals. It specifically covers you as an agent in the case of an error or omission that is made while servicing and/or selling products.

What does E&O insurance typically cover?

In most cases E & O insurance is very specific with regard to the products covered and in many cases, may be product-line specific. It is very important for you to understand this, especially if you write multiple lines of insurance.

Do I really Need Errors & Omissions Insurance?

One out of every seven professionals will be named in some type of E&O claim at some point in their careers. The average cost per settled claim is in excess of $16,121.

Errors And Omissions Coverage Provides You With:

Peace of mind against future claims
Expert professional and legal counsel provided to represent you
Protection for current and future wage earnings

Components of an errors & omissions insurance policy

There are three basic coverage components of a claims-made policy: Prior Acts Date or Retroactive Date of Inception, an in-force policy and an Extended Reporting Period (ERP). If available and structured correctly, these three pieces can be seamlessly combined to provide the comprehensive coverage demanded by an insurance professional.

What is a claims made policy?

All E&O insurance policy forms are referred to as claims made. In a claims made policy, coverage is triggered if a claim is made during the policy period for an error or omission that occurred after the policy’s retroactive date (prior acts coverage date).

What is the retroactive date of inception (RDI)?

The retroactive date of inception (RDI) or prior acts coverage date is one of the most important issues to understand when purchasing E&O coverage. Prior acts coverage defines just how far back in your professional services career your E&O coverage will extend. Some plans may offer no prior acts coverage. This means that you are only covered for E&O claims that arise from activities occurring after your policy effective date. A comprehensive E&O plan offers prior acts protection.

What is an extended reporting period (ERP)?

The purpose of an Extended Reporting Period (ERP), commonly referred to as “tail” coverage is to provide some degree of E & O protection to an agent who has left the business, become disabled or retired. Instead of purchasing a new claims-made policy year after year, an agent can purchase an ERP for usually one to five years. The ERP does just what you’d think; it allows the agent to extend the period of their last active policy under which claims may be filed, following the original policy’s expiration date. An ERP does not cover any new business activities; rather it only addresses claims that arose after the insured’s prior acts date and before the termination date of the insured’s last in-force policy.

Avoiding gaps in coverage

It is extremely important that you understand the crucial need to avoid “gaps” of any kind in your E&O coverage. If you allow any gap to occur, even a gap of 1 day, between one policy’s expiration and the next policy’s effective date, you could ultimately lose years of prior acts protection.