Definition of Errors & Omissions Insurance
Errors and omissions insurance is designed to protect financial advisors. Get a definition of errors and omissions insurance with help from a certified financial planner TM professional with over a decade of experience in wealth management in this free video clip.
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Hi, I'm Samantha Fraelich, and I'm a Certified Financial Planner Professional. I'm here today to talk to you about errors and omissions insurance, and what the definition really is. Have you ever felt wronged by a financial adviser? Did you participate in an investment or a transaction where you feel like maybe not all of the risks were explained to you or that it wasn't appropriate to your situation? Did you contemplate maybe suing that adviser? Those very types of lawsuits are the reason that errors and omissions coverage exists. Errors and omissions insurance is professional liability insurance that most financial advisers or insurance representatives are required to have to conduct business. While most broker dealers have specific requirements as to what level of errors and omission is required, regulatory agencies such as FINRA or the SEC can also require these types of insurance. Depending on the type of coverage that you have, it may cover legal or court costs and even help pay for certain settlements subject to those policy limitations. As with any other type of insurance, the more claims that a person has, the more expensive that insurance can become. Errors and omissions insurance helps cover professionals for errors and mistakes, negligence or inadequate work. If you find yourself the subject of a complaint, be sure to talk to your designated supervisor about whether it makes sense to involve your errors and omissions coverage or not. As with any other type of insurance, the more claims that occur, the more expensive that coverage can become. Again, I'm Samantha Fraelich, and I hope that you understand errors and omission coverage a little bit better.