Does Your Business Need E&O Insurance?

Before determining whether you need E&O insurance, let’s first find out what it is. Errors and Omissions insurance falls under professional liability insurance, which protects organizations, businesses, employees, and other working professionals against professional negligence or failure to deliver on specified business terms.

Let’s dive in and find out more, to discover the professionals and businesses that are likely to benefit from having errors and omissions insurance coverage.

Errors and Omissions Insurance Explained

Experts who give suggestions, advice, assistance, or services are covered by E&O insurance. E&O insurance, like any other small business insurance coverage, can be obtained from an insurance provider or broker. However, E&O insurance may go by a different name in your business.

Professional liability insurance or malpractice coverage are other names for the policy.

E&O insurance can protect firms from allegations of monetary loss or reputational harm. If a client alleges that a company professional’s service was insufficient, incorrect, or negligent, the insurance carrier that provides E&O insurance is called. Some customer claims may be genuine, while others may be suspect. There are a number of factors that determine the cost of errors and omissions insurance, but for small businesses, the typical range is $500-1000 per employee per year.

Errors and omissions insurance is required for service-based organizations. Without E&O, a company may suffer heavy losses from customer-initiated litigation.

NOTE: Businesses that operate from a home office must get separate coverage; errors and omissions insurance cannot be obtained under homeowners’ insurance.

What Do Errors and Omissions Insurance Cover?

E&O insurance covers the costs associated with defending against claims of professional negligence or mistakes that cost money brought against your business or organization. Often, the policy will cover the following:

• Defense costs
• Attorneys’ fees
• Judgments
• Settlements
• Copyright infringement
• Negligence
• Claims and damages
• Independent contractors and temps (temporary staff)

The policy can help a business protect itself and ensure continuity even after claims that your work was inadequate, never delivered, or delivered late.

Is E&O A Legal Requirement?

Various states require firms that provide professional guidance or services to have E&O insurance. So even if your state does not mandate it, it is nevertheless a smart idea to have this coverage.

You’ll be required to pay for complaints out of pocket if you don’t have E&O insurance. However, if you or your workers make a mistake while working, E&O coverage can help cover legal defense expenses.

It’s also vital to remember that E&O policies have a backdate. This is the day your policy becomes active. A longer reporting period also aids in the coverage of claims made within a prescribed period after your policy ends. In most situations, this is between 30 and 60 days.

Which Businesses Need Errors and Omissions Insurance

Some industries and sectors will benefit more from errors and omissions than others. Are you one of them? Let’s talk about some of the sectors most at risk of facing problems over claims to give some context on who needs E&O insurance.

• Property Investment

Realtors deal with legal disclosures and price listing concerns with clients, which may result in a customer lawsuit. In addition, a consumer may accuse them of carelessness or a breach of fiduciary obligations, such as not reporting a property defect.

• IT Specialists

For example, IT experts, repair technicians, and software developers might face costly litigation if they make a mistake, are unable to deliver on promised services, or if a customer accuses them of a hack or data loss.

Errors and omissions coverage is sometimes combined with cyber insurance coverage in a package is known as technology errors and omissions insurance.

• Insurance Brokers and Companies

Insurance agents counsel their consumers on the level of protection they require, leaving them subject to charges of professional negligence, coverage errors, or failure to follow through on a service commitment. Consider how costly it may be if a purchaser sues your agency for insufficient coverage based on your recommendations.

• Accounting And Tax Planning

A customer may accuse accountants and tax professionals of making accounting mistakes, committing an error on a tax filing, or failing to meet a deadline. A customer, for example, may accuse a broker or financial planner of providing inadequate financial advice. Almost everything that causes a client to lose money might result in a costly lawsuit.

• Service Professionals in General

Nonprofit groups, contractors, routine maintenance businesses, and engineering companies are examples of enterprises that can benefit from E&O insurance. E&O insurance is also required for any other corporation or professional who performs a service, including event planners and printers.

Medical professionals also purchase E&O insurance, which is known as malpractice insurance. However, even when customers know the risks, they could still end up suing, and even if a judge or arbitrator rules in your favor, you will still pay for legal fees out of pocket unless you have E&O insurance.

What’s Not Covered By E&O Insurance

These plans do not address criminal prosecution or some civil court responsibilities that are not stated in the policy. For example, the policy cannot cover illegal activities, purposeful acts of misconduct, or criminal activity.

E&O insurance frequently does not include bodily injury caused by your company, which is generally covered by general liability insurance. In addition, a policy can include or exclude claims by temps (temporary employees), claims in other jurisdictions, or claims arising from work completed before the policy’s inception.

It may also exclude lawsuits for data leakage caused by cybercriminals, employee injury, or prejudice. These latter three scenarios are covered by distinct insurance forms that aren’t included in E&O policies.

E&O Insurance Summarized

Remember that E&O insurance is time sensitive while you shop for it. You cannot access insurance advantages if a client brings a complaint against your company before you obtain one, which is why you should get it before. It is essential to obtain E&O coverage before anything happens.

It is also worth noting that the liability limitations and deductible levels will differ across insurance companies. Furthermore, certain policies may prohibit particular forms of coverage. Get estimates from several insurance brokers and compare terms to obtain the best coverage. Before signing up, ensure you understand all aspects of the policy.

An errors and omissions provision that is appropriate for one organization may not be appropriate for another. E&O coverage is determined by your company’s requirements, risk tolerance, and cost.