Travel Agency Insurance: 5 Reasons Why Travel Agents Need Errors and Omissions Insurance Coverage

eo insurance travel agency

Owning a travel business is exciting, but there’s one important step you don’t want to forget that we find many travel agencies and independent contractors overlook: insurance. Specifically, errors and omissions (E&O) insurance, also known as professional liability insurance. Travel agents often overlook the ins-and-outs of this important coverage, but is can protect you from major losses and help preserve your profits.

As a new travel agent, you might not have heard of E&O insurance before, but it’s critical for your business. It safeguards against lawsuits related to alleged errors, negligence, complaints, misrepresentation, and inaccurate advice. In a covered claim, E&O insurance can help pay the legal costs of these types of lawsuits.

Let’s dive into the five reasons why your travel agency needs E&O insurance:

1.      Protection against client complaints

Vacationers all over the world hire travel professionals or travel advisors in order to simplify the vacation planning process. So when something does not go as planned or expected, customers complain and may file a claim. In fact, it does not take much for clients to feel empowered to file a lawsuit. Even if clients are simply unhappy with the quality of the hotel, tour operators, cruise line or transportation recommended by the travel agents, they may sue, which in turn opens an insurance claim.

Often times travel agents may speak highly of a particular hotel, however, the client’s experience may be significantly different. While a variety of factors may cause the difference in perception, unhappy clients are simply looking for someone to blame for their less than expected trip experience. Most travel agents do not recognize that E&O insurance provides an easy mechanism to turn a lawsuit into an insurance claim. Unfortunately, a travel agent cannot hide behind the quality of the various tour operators, as often times a tour operator may make a mistake that leads to a complaint. Ultimately though, the travel agent is responsible for any mistakes involved in trips sold.

2.      Coverage for Professional Services

A travel agent’s job is to plan the vacay and book it. And even if you are the best at what you do, problems can arise out and clients may file a suit.

For example, a travel agent may mistakenly book a hotel for one less day than necessary based on the client’s airline schedule. In this case, the client sued since they were put in a difficult position of having to find last minute lodging. The travel agent may even encourage the traveler to add travel insurance, however this coverage still does not protect the travel agent’s businesses against claims for errors in planning trips.

travel agency insurance

3.      Legal Defense Coverage

Our culture is increasingly litigious and legal expenses are at an all-time high. When a long awaited vacation does not go as expected, even if it is at no fault of the travel agent, clients often sue just because they are disgruntled.

Travel agents are required to defend themselves from legal claims, which can be very expensive. E&O insurance responds to pay legal fees necessary to defend the travel agent from its potential legal liability. It does not matter how frivolous the lawsuit, the legal defense coverage will respond to pay for the travel agent’s legal fees in order to defend itself.

 4.      Protection for Business Assets

Travel agents are subject matter experts, but even the best ones make mistakes. If this happens and a lawsuit follows, then it is possible that the result will be either a settlement or a judgement. When this occurs, the travel agent must pay the settlement or damages issued by the court, which may be a large sum of money. In many cases, the travel agent may not have the funds necessary to fulfill this obligation. As a result, the court could seize the business’ assets, including lost wages, which could ultimately cripple your small business.

On the other hand, if a travel agent has an E&O insurance policy, then once the court issues the judgement, then the insurance policy will provide coverage to pay the settlement or damages up to the policy limit. In the same way a property insurance policy protects the business from property damage, an E&O policy protects a travel agents’ business assets from financial loss if sued.

5.      Peace of Mind

Finally, E&O insurance is a must have for travel agent businesses because it offers peace of mind or assurance that even in the unlikely event of a mistake by travel agents, the small business will be protected from a potentially devastating financial loss. The purpose of insurance is to protect a business from an unexpected event. If a travel agent makes costly unexpected mistakes, then it would be unfortunate if these made the business unsustainable going forward due to significant adverse claims.

If travel agents have E&O insurance, then the policy would simply respond to pay to defend any claim or complaint as well as the cost of any settlement or judgement. This protects both the balance sheet and income statement for travel agents. Insurance providers offer unique solutions through E&O coverage to help mitigate potential claims. Peace of mind comes from knowing that this important insurance protects the small business from lost revenue and ultimately lost customers.

travel agent liability

A small business travel agency provides a unique service to customers, helping to streamline the vacation or travel planning process. While this is an important role offering a needed service, it also comes with risk. The top rated providers of E&O insurance offer broad coverages at minimal cost designed to protect small businesses from agent errors. The travel agency must consider this risk and understand that client complaints are a natural part of the business. As complaints happen in the travel planning process, lawsuits eventually follow. With lawsuits come expensive legal defense costs and potential damages, including loss of small business assets.

E&O insurance offers a simple and affordable solution to transfer some of this risk from the travel agency office to the insurance company. When a travel agency buys E&O insurance, it gets peace of mind, which is just what the small business needs to ensure it will be around for years to come. 

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