What is Errors and Omissions Insurance
According to the U.S. Small Business Administration (SBA) Office of Advocacy, as of 2019, there were 4 million small businesses in California. While they accounted for 99.8% of all the state’s businesses, these figures are steadily on the rise.
Regardless of which industry you are in, the type of products you sell, or the nature of the services you provide, there are always possibilities to make mistakes. While you may have an excellent track record, all it takes is one error to bring a lawsuit against your business
Therefore, in a highly competitive business environment, where clients are increasingly becoming more exacting in their demands, Errors and Omissions Insurance, which is also called Professional Liability Insurance, is needed to help small business owners to protect their future finances. Errors and Omissions Insurance covers your business against claims as a result of your negligent actions (errors) or inadequate services (omissions).
What does Errors and Omissions Insurance cover
In California, Error and Omissions Insurance covers a range of expenses, up to the limit specified in your insurance contract. It will help you save:
- Legal Costs – Lawyers typically charge an hourly fee. Hiring good legal counsel is expensive, even if your case is resolved quickly. So the longer the issue takes to get resolved, the more you have to shell out.
- Court Expenses – Filing documents with the court, underwriting charges, other administrative costs, and any related legal expenses.
- Settlements – To facilitate saving both parties money from expensive long-drawn-out litigation, usually claims are settled out of court. Depending on what your legal counsel advises, you might have to pay the client a certain amount.
- Judgments – In the eventuality your case does go to trial, and if the judge rules in favour of the plaintiff, you will have to pay the adjudged amount or run the risk of a lien being placed on your business assets
Who needs Errors and Omissions Insurance?
Businesses and professionals whose work pertains to providing clients with advice, educated recommendations, designing solutions or those who represent the needs of others should get Errors and Omission Insurance.
Regardless of whether the associated claim is legitimate or baseless, Errors and Omissions Insurance will protect your professional reputation, your profits and business assets from potentially expensive consequences.
Professions that typically need Error and Omissions Insurance include but are not limited to:
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How much does Errors and Omissions Insurance cost
In California, though the annual average cost of Error and Omissions Insurance is approximately $773, it depends on the nature of your business. As with all other insurances, the higher the element of risk, the more premium you will need to pay to cover that risk.
Factors that will determine the cost of your Errors and Omissions are:
- Your business’ priorities, location and risk appetite
- Your business’ turnover and size
- The amount of insurance cover you need
- Your previous claims history, if any
- The individuals being covered – their qualifications, suitability for the job and if they have any history of claims