Due Care
What Does Due Care Mean?
Due care involves informing the client about the features of an insurance policy, particularly the potential risks that may arise in the future related to the purchase.
Insuranceopedia Explains Due Care
Truthfulness and disclosure are legally required when a company or agent sells an insurance policy. Both must avoid misrepresenting a product (e.g., claiming a feature that is not actually included in the policy) or omitting any features that could potentially discourage a client from making a purchase. This obligation is part of due care.
If a company or agent fails to exercise due care, the client may sue for negligence, which could lead to the company’s closure, substantial damages, and the revocation of the agent’s license due to malpractice. Because of this exposure, many agents carry professional liability insurance to protect themselves against claims arising from errors or omissions in their work. The cost of insurance agent coverage varies depending on the agent’s volume of business and claims history.