Fiduciary insurance is a type of insurance that protects the assets of trusts, estates, and other fiduciaries. Fiduciary insurance typically covers several aspects of the business, including liability, fiduciary breach, data loss, and cyber liability.
The main purpose of fiduciary insurance is to protect the assets of the trust or estate. It does this by covering any losses that might occur due to a breach of duty or negligence on the part of your company’s employees.
Fiduciary breaches can include misappropriation (theft) of funds, forging signatures on checks or documents, fraudulently transferring funds, fraudulent use of credit cards, etc. The list goes on!
Suppose an employee commits a breach while acting as a trustee or executor for an estate or trust and damages are incurred as a result of their actions. In order to protect yourself from these types of damages, you can purchase fiduciary insurance policies, which will cover them in full if they occur while acting within those roles within your company.
Now you might be wondering, “Where to buy Fiduciary Insurance?” There are a plethora of companies that sell fiduciary insurance, but not all of them are legit. You can explore established companies like Euclid Fiduciary. Euclid’s insurance polices fiduciary insurance, and they have experienced professionals who can expertly handle any issue related to fiduciary disputes.
Question: Why Do I Need Fiduciary Insurance?
You need fiduciary insurance because it protects you from lawsuits.
What does that mean? It means if your clients are suing you for some kind of breach or violation of their trust, and the suit is successful, the fiduciary insurance will cover those costs.
So why would someone sue me? If a client feels like they’ve been wronged by the person they hired to help manage their finances, they may take legal action against them. There are all kinds of different reasons why this could happen, but essentially, it’s because they’re not satisfied with how their money is being handled.
And what happens if I don’t have the right coverage? If you don’t have the right coverage and get sued over something related to handling someone else’s money, then you could be on the hook for hundreds of thousands of dollars—or even millions—in penalties. The worst part is that these fees don’t just go away when you get sued; they stick around forever. So, if you don’t have enough money saved up to cover all those costs, then you might end up going into debt or having to sell your house in order to pay off these debts.
As per Marsh’s Report on United States Insurance Market, since 2006, more than 30 lawsuits against plan sponsors, service providers, and other fiduciaries for excessive fees relating to 401(k) plans have begun.
Question: Who Needs to Have Fiduciary Insurance?
If you’re a fiduciary, you need to have fiduciary insurance. Fiduciaries are the people who hold your assets (your money, for example) for you. They can be anyone from a bank or investment firm to a lawyer or accountant.
You should have fiduciary insurance if:
- You are providing financial advice to clients or customers, and they pay you for it.
- You manage accounts for other people’s money. For example, if you’re an investment advisor—even if it’s just a side gig—you should probably get this coverage.
- You manage investments on behalf of clients or customers. If you don’t want the responsibility of having someone else’s money on your shoulders, then this kind of insurance is still necessary even if you don’t charge them any fees!
Question: Is Fiduciary Insurance Really Necessary?
Fiduciary insurance is an important part of running your business. Whether you are an accountant, financial planner, or lawyer, you are a fiduciary. This means that you are legally responsible for the money or assets that you manage on behalf of another person.
Fiduciary insurance is necessary because it protects you from liability if you make a mistake as a trustee, executor, or another kind of fiduciary. For example, if you make an investment that goes south and causes your beneficiary to lose money, then they could sue you for their loss. If you had been properly insured against this possibility, then your insurer would cover any losses.
In addition to protecting against financial losses, fiduciary insurance also protects against physical harm. If you fall ill while carrying out your duties as a trustee or executor, then your beneficiary may file suit against you for neglecting your obligation to them. You might also find yourself facing legal action if someone sues you for using funds in an improper way or violating their rights as a beneficiary under the law.
Since the 2000s, the fiduciary liability insurance market has not witnessed an upsurge in rates. That’s great for the entities willing to purchase this type of insurance.
The market of fiduciary liability is majorly boosted by the excessive fee class actions. In a nutshell, fiduciary insurance covers your business if one of your employees gets into trouble with the law. This can happen for many reasons, such as drinking and driving, having an affair with one of your customers, being caught embezzling from your company, etc. Whatever the case may be, it’s up to you to cover any damages caused by their actions—and that’s where fiduciary insurance comes in.