Business Insurance Tips For Mortgage Brokers
Mortgage brokers are facing an increasing need to acquire a good business insurance policy. Both large and small brokerage firms are susceptible to a variety of lawsuits, but powerful business insurance protects brokerage firms from, well, going broke. Here's a handy guide to business insurance for mortgage brokers.
Build a Versatile Policy
First of all, the types of claims that mortgage brokers face are very different than the standard claims levied against other professionals. Many claims issued against brokerage firms relate to mismanagement of funds which is covered by a specialized insurance policy. This is why it's important to consult with a legal professional before purchasing an insurance plan.
Brokerage firms should carefully analyze the limit of liability they purchase to ensure that they will not have to pay damages out of pocket. Mortgage and brokerage litigation tends to result in astronomical legal fees for both sides. Commercial brokers can purchase various limits of insurance with the minimum limit recommended being $1,000,000 with higher limits being available depending upon the size of company.
Optimize Your Legal Team
Some liability policies offer dollar one defense coverage with no policy deductible. This will mean that the insurance will pay for cost of legal defense for your insurance claim up to the policy limit. The insurance policy you purchase may offer you the ability to choose your own lawyer, or they may require you to use the insurance company appointed lawyer.
Most mortgage and brokerage firms should also try to incorporate full prior acts coverage. D&O and E&O policies only cover claims for acts that occur and are reported after the policy inception date.
These policies include a retroactive date or prior and pending litigation date.Â This will mean that the insurance company will provide coverage for you from the day your insurance policy started.Â Be wary if you are changing carriers because this date may not backdate to your original policy retroactive date.
Also, check to see if libel and slander claims are excluded. Mortgage brokerage firms are subject to libel and slander suits, so these should be included in your insurance policy. Ensure that mortgage syndication is not excluded, either. It's very sad when a mortgage company has bought full insurance, but mortgage syndication is excluded. This leaves the firm vulnerable.
You can also check with AM Best and other regulatory agencies to make sure that your insurance company is rated highly. Only buy a policy from a well established A-, VII rated company, to validate that the insurance company you buy from is financially sound.
Balance Deductibles and Premiums
Many small business insurance premiums will cost as little as $750 a year. Of course, these plans might not provide adequate coverage. You should balance policy premium with the amount of coverage you need. This way you are covered at limit you feel comfortable at a price you can afford.
Since insurance for mortgage brokerages is very specialized, only hire an insurance agent that has comprehensive expertise in the mortgage brokering industry. Only these companies are equipped to handle your company's financial security.
Errors and Omissions coverage is a necessary for brokerage firms, but there are special attributes of these policies that must be attended to. Consult with an insurance professional to build a policy that will suit the needs of your brokerage firm. You may be required to complete a short application, but this is necessary for insurance companies to quote this coverage for your business whether it is large or small business.
Learn more about business insurance and how to compose a plan that will benefit your brokerage.