This Is How to Lose a Paycheck Protection E&O Claim
One common mistake could cause you to lose a paycheck protection E&O claim. Are you making it?
According to an article that appeared in Insurance Journal, insurance brokers may be hit with a tsunami of E&O lawsuits in 2021. The pandemic and related coverage issues are fueling the expected surge.
Many of the lawsuits may be related to business interruption coverage. However, lawsuits involving other types of coverage are also possible.
If your clients develop long-term disabilities as a result of COVID-19 and cannot work as a result, how will they pay their bills? Without disability insurance, they may not have any good options. If they don’t have coverage, they may blame you for failing to advise them properly, and that can lead to a lawsuit.
So what can you do?
Obviously, you need to tell your clients about paycheck protection. Unfortunately, this may not be enough. If your clients reject coverage and later regret the decision, what’s to stop them from claiming you didn’t make the importance of coverage clear enough?
Good documentation, that’s what.
Don’t Just Offer Paycheck Protection – Document It
If you are ever slapped with an E&O lawsuit, one thing is a game changer. That one thing is documentation. Lack of documentation is a guaranteed losing proposition.
Therefore, when offering paycheck protection and presenting disability insurance quotes, it’s vital that you protect yourself by making sure all communication with your customers is clear and adequately documented. Typical scenarios involving lack of documentation include failure of an agent or CSR to do one or more of the following:
- Secure the signature of the insured/applicant on a new business application, renewal application, or policy change request (even requests to increase coverage).
- Maintain copies of proposals and quotes that show additional coverages and higher limits were offered, with pricing.
- Make and retain notes, including details of all telephone conversations and meetings with clients.
- Have the client sign a DI Waiver of Liability stating that the client was informed of the need for disability insurance but chose to decline the coverage.
As an insurance advisor, DI just might be the most important coverage you can offer and the most important offer you can document. After all, if your customers aren’t protecting their paychecks, they may end up without a home, vehicle or anything else to insure. By giving your clients solid facts and statistics, you can show them that disability insurance is more important than life insurance for most workers.
When you communicate the options to your clients, thoroughly document everything, not only in your agency system but in writing. As an insurance advisor, it’s your obligation to inform your clients of available coverage and protect them with the best available options. Just make sure that while you’re protecting their paychecks, you’re also protecting your professional liability.
What Your Clients Need to Know
While it’s common for people to prepare for death by purchasing life insurance, many of those same people fail to prepare for life by protecting their paycheck with disability insurance. And yet statistics clearly show the chance of suffering a disability is much greater than the chance of dying, as much as 6.5 times greater according to the National Association of Insurance Commissioners.
Statistics also clearly show that a disability can lead to financial ruin. Even with the Affordable Care Act, medical bankruptcy remains common. A study found that 66.5% of people going through bankruptcy cite medical expenses or medical problems causing work loss as a reason.
Why Some Clients Say “NO” to a Disability Insurance Quote
Some people cling to the notion that “it can’t happen to me.” For others, the premiums are just too high. Others assume they have adequate coverage through Social Security or their employer’s long-term disability (LTD) plan. But even with employer-provided long-term disability coverage, many disabled workers find themselves with income gaps as wide as 72 percent.
These sales barriers are not as formidable as they seem. The Disability Insurance Services sales team can help you create disability insurance quotes for every budget (remember that some coverage is better than none) and they can help you create an effective sales presentation to address common sales objections.
How to Protect Your Career
When a client suffers a disability and finds out he is not covered, he will be angry, scared, and looking for someone to blame. The financial advisor or insurance broker is the most obvious target. Be ready for this scenario by taking the following steps with every client.
Inform every personal and business client about the need for income protection. If you haven’t already done so, download the disability insurance sales script, so you know how to effectively present the coverage.
- If a client declines to receive a disability insurance quote, have him sign a Waiver of Liability (included in the disability insurance sales script pack).
- If a client agrees to receive a disability insurance quote, keep the quote and notes about your follow up actions on file.
- If a client ultimately chooses a smaller amount of coverage for budgetary reasons, maintain documentation on that as well. If you are signed up as a Disability Insurance Services broker, our innovative Agent Portal will maintain some of this documentation for you for easy reference.
Even after a client declines paycheck protection, continue to remind him or her of the need several times a year – in your customer newsletter, quarterly account reviews and personal conversations.
By consistently offering paycheck protection, you can ensure your own professional liability protection … but only with the right documentation. If you haven’t heard, disability insurance claims are on the rise, older workers are the new norm and retirement income is scarce. It’s the perfect paycheck protection lawsuit storm, so prepare now … before it’s too late.
Need the DI Waiver of Liability Form? Download the disability insurance sales script today – the waiver is included for your convenience. Need disability insurance quote? Our online quote engine is ready to help.