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Financial Services Insurance Policy Information

Financial Services Insurance. If you are in the financial advice business, then there are risks you face every day in the operation of your business. When you are in the business of financial services you help customers with managing their risk, building their wealth and reaching their financial goals. With so many outcomes out of your control, you must protect your business.

Having the right insurance is a good way for you to protect your financial business. Getting the right financial services insurance is a matter of knowing the risks you face and what you need to protect. Speaking with an experienced insurance agent is the way for you to get the best coverage.

Financial services insurance protects your shop from lawsuits with rates as low as $47/mo. Get a fast quote and your certificate of insurance now.

Below are some answers to commonly asked financial services insurance questions:

• What Is Financial Services Insurance?
• How Much Does Financial Services Insurance Cost?
• Why Do Financial Service Advisors Need Insurance?
• What Type Of Insurance Do Financial Services Need?
• What Does Financial Services Insurance Cover & Pay For?

Financial Service's Risks & Exposures

Premises liability exposure is often minimal since much of the client contact is done electronically or by mail. If clients visit the premises, they must be confined to designated areas to prevent them from overhearing conversations regarding other clients' confidential information.

To prevent slips, trips, and falls, all areas accessible to clients should be well lighted with floor coverings in good condition. The number of exits must be sufficient, and be well marked, with backup lighting in case of power failure.

Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. Off-premises exposures arise from sales visits, training sessions, and similar work at the customer's premises. There should be policies and training as to off-site conduct by employees.

Professional liability exposures are extensive. Working with individual clients presents fewer professional exposures than working with corporate clients.

The exposure increases if the planner fails to conduct thorough background checks to verify employees' credentials and education, if clerical workers are allowed to do tasks that only professionals should handle, or if error checking procedures are ignored or are inadequate.

All employees must be appropriately certified for the financial planning provided. If financial products are sold, the appropriate licenses must be in place. All advice given must be documented. Very serious losses may result from failure to document decisions and actions or to secure client approval.

Workers compensation exposures are generally limited to those of an office. Since work is done on computers, potential injuries include eyestrain, neck strain, carpal tunnel syndrome, and similar cumulative trauma injuries that can be addressed through ergonomically designed workstations.

Some financial planners travel extensively off site for sales presentations and similar activities. Workers can be injured by slips and falls at clients' premises or in automobile accidents.

Property exposure is generally limited to that of an office, although there may be some incidental storage or an area for meetings. Ignition sources include electrical wiring, heating, and air conditioning systems, wear, and overheating of equipment. Computers and other electronic equipment may be targets for theft.

Crime exposure is from employee dishonesty, which can be quite serious as financial planners routinely have access to their clients' personal financial information, such as banking and investment accounts. Potential for theft, directly or by means of identity theft, is great.

Hazards increase without proper background checks, along with monitoring procedures and securing of all records to prevent unauthorized access.

All job duties, such as ordering, billing and disbursing should be separate and reconciled on a regular basis. Receipts should be issued for any cash payments received. Bank deposits should be made on a timely basis to limit the buildup of cash on premises. Audits should be performed at least annually.

Inland marine exposures consist of accounts receivable if the firm offers credit, computers, and valuable papers and records for customers' and vendors' information. Clients' records and approvals are typically originals that are difficult to re-create.

Power failure and power surges are potentially severe hazards. A morale hazard may be indicated if the insured does not keep valuable papers and disks in fireproof file cabinets to protect them from smoke, water, and fire. Duplicates should be kept off-site to allow for re-creation in the event of a loss.

Business auto exposure is generally limited to hired and non-owned. If vehicles are provided to employees, there should be written procedures in place regarding personal use by employees and their family members.

All drivers must have appropriate licenses and acceptable MVRs. Vehicles must be maintained, and records kept in a central location.

What Does Financial Services Insurance Cover & Pay For?

Financial services firms can be sued for various reasons, and insurance can play a crucial role in mitigating the risks and financial impact associated with these lawsuits. Here are some common reasons why financial services firms might be sued and how insurance can help protect them:

Professional negligence: Financial services firms may be sued for giving incorrect or unsuitable advice, or failing to provide an adequate standard of service. Professional indemnity insurance (PII) can help protect the firm by covering legal defense costs and compensation payments, should the firm be found liable.

Breach of fiduciary duty: If a financial services firm is accused of breaching their fiduciary duty, such as by failing to act in the best interest of a client, they could be sued. Directors and officers (D&O) liability insurance can help protect the firm and its key personnel by covering the legal defense costs and any damages awarded.

Misrepresentation or fraud: Financial services firms may be sued for misrepresenting financial products, giving misleading advice, or committing fraudulent acts. Crime insurance or fidelity bonds can help cover losses resulting from employee dishonesty, while PII can help cover legal costs and compensation payments for misrepresentation claims.

Employment practices liability: Firms can be sued for various employment-related issues, such as wrongful termination, discrimination, or sexual harassment. Employment practices liability insurance (EPLI) can help cover the legal costs and damages resulting from such lawsuits.

Cyber liability: With the increasing reliance on technology, financial services firms can be sued for data breaches, loss of sensitive client information, or other cyber-related issues. Cyber liability insurance can help cover costs associated with legal defense, notification expenses, and potential regulatory fines.

Regulatory compliance: Financial services firms are subject to various regulations and can be sued for non-compliance or violation of regulations. Regulatory legal expense insurance can help cover the legal defense costs and potential fines or penalties associated with regulatory investigations or enforcement actions.

For each of these examples, insurance can help pay for the lawsuit by covering the costs of legal defense, settlement negotiations, and any damages or fines that may be awarded. The specific coverage and limits will depend on the type of insurance policy and the terms and conditions agreed upon between the financial services firm and the insurer.

Commercial Insurance And Business Industry Classification

• SIC CODE: 6282 Investment Advice
• NAICS CODE: 523930 Investment Advice, 523920 Portfolio Management
• Suggested Workers Compensation Code(s): 8803 Auditor, Accountant, or Computer System Designer or Programmer - Traveling, 8810 Clerical Office Employees NOC

Description for 6282: Investment Advice

Division H: Finance, Insurance, And Real Estate | Major Group 62: Security And Commodity Brokers, Dealers, Exchanges, And Services | Industry Group 628: Services Allied With The Exchange Of Securities

6282 Investment Advice Establishments primarily engaged in furnishing investment information and advice to companies and individuals concerning securities and commodities on a contract or fee basis. Establishments that provide advice and also act as brokers or dealers are classified in Industry 6211.

• Futures advisory service
• Investment advisory service
• Investment counselors
• Investment research
• Manager of mutual funds, contract or fee basis

Financial Services Insurance - The Bottom Line

Protecting your business is important. Without the proper financial services insurance protection in place, you could lose everything in your business. When running your financial services business, you must always be prepared.

Many things can go wrong in your finance and insurance business, and this is the reason you must have the best insurance when it does. Being sued is one of the worst things that can happen to your business but when you are insured you minimize loss.

Additional Resources For Professional Services Insurance

Get informed about small business professional services insurance, including Professional liability, aka errors and omissions (E&O insurance), that protects your business against claims that a professional service you provided caused your client financial loss.

• Accounting
• Actuaries
• Answering Service
• Architects
• Armored Car
• Attorney Lawyer
• Auctioneer
• Auditor
• Background Music Services
• Bookkeeping
• Business Consulting
• Chemical Engineers
• Civil Engineers
• Claims Adjuster
• Commercial Laundries
• Commodity Broker
• Corporate Wellness
• Couriers
• Court Reporter
• Credit Bureaus
• Debt Collection Agency
• Draftsman
• Detective Agency
• Diaper Services
• Electrical Engineering
• Engineering
• Environmental Consultant
• Executive, Career & Life Coaching
• Executive Search Firm
• Expert Witness
• Financial Planner
• Financial Services
• Funeral Directors
• HR Consultant
• Inspection Bureaus
• Insurance Agents & Brokers Insurance
• Interpreter
• Mediator - Arbitrator
• Medical Billing
• Music, Drama & Dance Therapy
• Notary
• Office Machine Repair & Maintenance
• Piano Tuners
• Project Management
• Safety Consultants
• Speakers Bureaus
• Stockbrokers
• Surveyor
• Tax Preparer
• Temporary Staffing
• Title Abstractors
• Valet Parking
• Specialty Consultants
• Specialty Service Business

The professional services industry, which includes occupations such as lawyers, doctors, accountants, and architects, often deals with sensitive and complex issues that carry a high risk of liability. These professionals are expected to provide their clients with expert advice and guidance, and any mistakes or oversights can result in significant financial consequences for both the client and the professional. This is where insurance comes into play.

Business insurance provides protection against the financial repercussions of potential mistakes or accidents that may occur while providing professional services. For example, a lawyer may make an error in their legal representation that leads to a financial loss for their client. Without insurance, the lawyer would be personally responsible for covering the cost of this loss. Insurance helps to protect professionals from these types of financial burdens and allows them to focus on providing high-quality services to their clients.

In addition to protecting against financial losses, commercial insurance can also provide legal defense for professionals facing legal action as a result of their work. This can be especially important for professionals in high-stress or high-risk fields, such as doctors or architects, who may be at a higher risk of being sued for professional negligence.

Overall, the professional services industry needs insurance to protect against financial losses and legal action, ensuring that professionals can continue to provide high-quality services to their clients without the added stress and burden of potential financial consequences.

Minimum recommended small business insurance coverage: Business Personal Property, Employee Dishonesty, Accounts Receivable, Computers, Valuable Papers and Records, General Liability, Employee Benefits Liability, Professional Liability, Umbrella Liability, Hired and Non-owned Auto Liability & Workers Compensation.

Other commercial insurance policies to consider: Building, Business Income with Extra Expense, Earthquake, Equipment Breakdown, Flood, Computer Fraud, Forgery, Money and Securities, Special Floater, Cyber Liability, Employment-related Practices Liability, Business Auto Liability and Physical Damage and Stop Gap Liability.