Conditions precedent · suitable advice · the long tail
Professional indemnity insurance (BAV) for a self-employed mortgage adviser
In mortgage advice the mistakes are rarely in the arithmetic. They lie in a deadline that passes and in a risk that was not discussed.
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Deze pagina in het Nederlands: Beroepsaansprakelijkheidsverzekering voor een zelfstandige hypotheekadviseur.
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A premium indication, not personal advice. Prefer to talk it through? Call 072 - 509 24 56.
In brief
The most sensitive moment in a mortgage file is the deadline for the finance condition. If it passes without the condition being invoked in time or without the required rejection letters, the buyer is bound by the purchase contract and the seller can demand the contractual penalty. The buyer then seeks recovery from the adviser who handled the application. The same applies to an expired interest rate guarantee, a valuation requested too late and a completion date that is missed: all pure financial loss, with nothing being damaged.
The second category concerns suitable advice. Under Article 4:23 of the Dutch Financial Supervision Act (Wft) requires you to obtain the client's financial position, knowledge, experience, objectives and attitude to risk and to tailor your advice to them. Complaints are about what was not discussed: income after retirement where part of the mortgage is interest-only, the consequences of divorce or death, the tax consequences of remortgaging, or whether the income of a self-employed person is sustainable. Your file must show that it was in fact discussed.
These claims have a long tail. Advice is judged when the fixed-interest period ends or when the client's situation changes, and that can be years later. Professional indemnity insurance works on a claims-made basis: the moment of the claim counts, not the moment of the advice. If you work under a firm's licence, also look at professional liability for a mortgage firm.
This page deals with one situation. The full overview is on Compare professional indemnity insurance (BAV).
What to look out for
Four subjects that lead to a claim in mortgage advice more often than an arithmetical error.
Monitoring deadlines around the purchase contract
The finance condition, the interest rate guarantee and the completion date rarely run in step. Monitor all three separately and confirm to the client in writing which date expires when and what happens then. When a claim arises this is the first thing requested. Without that confirmation it is hard to show that the client let the deadline pass himself.
What the client declined must be recorded
A client who refuses the recommended life cover or mortgage payment protection often remembers it differently after a death or a period of incapacity. Record the refusal and the consequences discussed by email and keep the reply. Without that record it is assumed that the warning was never given.
Execution only is not a free pass
Even without advice you have a duty to inform and to warn, and the dividing line is narrower than it seems. As soon as you recommend a product or make a comparison, there is advice in substance. Record in writing which part of the service you do and do not provide and stick to it, including in messaging apps and telephone calls.
Where the cover stops
Outside the cover are administrative fines and penalty payments, refunding your own advice fees or commission, and liability under promises about acceptance or about a guaranteed interest rate. Advice on products for which the required professional competence or licence is missing is not insured. A deliberately incorrect statement in an application touches the exclusion for intent and recklessness in Article 7:952 of the Dutch Civil Code. A rise in interest rates in itself is not a professional error.
What does your premium depend on?
- Annual turnover: advice fees and commission together
- Number of cases per year: more applications means more deadlines to monitor
- Type of customers: first-time buyers, self-employed clients or buy-to-let properties weigh differently
- Additional product groups: advice on income, pensions or wealth alongside the mortgage
- Retroactive date: from what moment old files are covered
- Excess per claim: a higher excess means a lower premium
Insurers weigh these details differently. That is where your saving is.
What is covered
| Situation | AVB | BAV |
|---|---|---|
| The deadline for the finance condition passes and your client has to pay the contractual penalty to the seller | No | Yes |
| You request the valuation too late, the completion date moves and the client pays bridging interest | No | Yes |
| After a divorce a client says you never discussed the consequences of the interest-only part | No | Provided that |
| You damage the dining table at a client's home with your laptop bag | Yes | No |
| A client demands his advice fee back after the lender rejects the application | No | No |
| Your client loses his job and can no longer meet the monthly payments | No | No |
Advice is often only judged when the fixed-interest period ends. On a claims-made policy what then counts is the moment of the claim.
Frequently asked questions
This is what people ask us most.
The client missed the deadline for the finance condition. Am I liable?
That depends on the division of roles and on your record. An adviser is expected to monitor the deadline, warn the client in time and help invoke the condition with the required supporting documents. If you can show that you did so and that the client did not respond, the criticism shifts. Without a paper trail that defence is weak.
Is a complaint about advice from years ago still covered?
Only if your policy is in force at the moment the claim comes in and the advice was given after the retroactive date. If the file predates it, there is no cover. When you switch insurers, always ask to keep the same or an earlier retroactive date. A civil claim also has limits: the limitation of a claim for damages follows from Article 3:310 of the Dutch Civil Code.
I work for a franchise formula. Am I automatically co-insured?
Not as a matter of course. Some formulas insure affiliated advisers collectively, others specifically require you to produce your own policy. What matters is whether you are within the class of insured persons and whether the insurer can seek recovery from you after paying a claim. Ask for the policy schedule and for written confirmation, including what applies once the collaboration ends.
Do I also need public and employers' liability insurance (AVB)?
Yes, as soon as you visit clients at home or at their office. If you damage something there, that is damage to property and it falls outside professional indemnity insurance, which covers only financial detriment caused by your advice. Both policies can be taken out separately or combined; when you take them out, have it checked that there is no gap between the two covers.
Read more
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