Business owners have to think about and mitigate risks to and in their businesses. One of these risks is professional liability, which mainly applies to businesses providing a service or offering advice. Mistakes happen, and when they do, the business, its owner, or its employees might be liable. Errors and omissions help cover all claims made by a customer against the business or an employee. Without this insurance, the business would be forced to pay out of pocket. If you provide any professional services or advice, you are a prime candidate for this type of insurance.
What Does This Insurance Cover?
Errors and omissions (E&O) insurance covers errors and mistakes made by the business and that a customer feels entitled to a payment or settlement. Some of these errors and mistakes include negligence, violation of fair dealing and good faith agreements, misrepresentation, and inaccurate or false advice. If you are hit with a claim arising from any of these errors and mistakes, you could face legal defense costs, attorney fees, and court costs. You will also be responsible for paying any court judgments and settlements proposed if you are found liable. While you are dealing with a court case, you could lose earnings due to reputation damage or a slowdown in business activities. E&O insurance can help settle all these costs.
Businesses that Need Errors and Omissions Insurance
Depending on where your business is located or headquartered, your local laws might require getting E&O insurance before you start operations. However, it is always best to have this insurance even when not required because you never know when a complaint comes. Some businesses that can benefit from this type of insurance include accountants, technology professionals, interior decorators, advertising agencies, business and management consultants, and graphic designers.
How Much Does Errors and Omissions Insurance Cost?
Every business is different, and so their insurance costs will be different. However, several factors affect E&O insurance costs. These include the size of the business (more employees means a higher risk so higher insurance costs), how much the business makes, the type of industry, state and location, employee training (trained employees reduce risk), contracts, claims history, and coverage limits (more coverage means higher coverage cost).
You can get an e&o insurance cost estimate from trusted insurance companies. Then, talk to a consultant to see how the above factors affect your E&O insurance cost and what you can do to keep it affordable.
What Is Not Covered?
The E&O insurance does not cover some things, and the first one is employment practices. These include harassment or wrongful termination. For both, you will need employment practices liability insurance.
Property damage and bodily injury are also not covered. This also includes injuries, illnesses, and fatalities at work, for which you require workers’ compensation insurance. Errors and Omissions insurance can save your business, especially if a customer makes a huge claim against it. If there is a chance of making an error or omission during the provision of your services or advice, you need this insurance.