Errors and Omissions insurance is a common form of coverage that many business owners get to protect their business. Having a policy may be a requirement to work in certain industries or professions. It may also be required for other business reasons.
Let’s take a closer look at Errors and Omissions insurance, the types of businesses that typically buy this coverage, and common E&O insurance requirements.
What is Errors and Omissions Insurance?
Errors and Omissions insurance, commonly shortened to E&O insurance, is an essential form of coverage that protects small businesses from claims of negligence, mistake or error in their work, missed deadlines, and other issues with the services they provide. E&O insurance may also be referred to as Professional Liability insurance.
Who might need an E&O policy?
Many small businesses may benefit from the protections provided by E&O coverage. If you or your employees do any of the following, you may want to consider having this type of insurance policy:
- Provide clients or customers with a professional service
- Give advice or recommendations based on specialized knowledge or expertise
- Represent a client’s interests on their behalf
- Design custom products or solutions
Examples of professions that commonly seek E&O coverage include:
- Accountants and bookkeepers
- Architects and engineers
- IT professionals
When is E&O required?
E&O insurance may be required in some circumstances, including:
1. To get a professional license
Some professionals may need E&O insurance to get their professional license. Without it, you will be unable to legally work in your field. This requirement varies between occupations and often between states or cities. It’s wise to check the requirements in your area to ensure that you are properly licensed.
2. To comply with the law
Like regulations around professional licensing, some states or cities may require certain professionals to have E&O insurance. This often includes a minimum level of coverage that you must meet to legally work in the area.
3. To fulfill a contractual obligation
Sometimes E&O insurance requirements come from your clients and business partners rather than the law. Those you work with may mandate that you have coverage, so they can be sure that you’ll be able to provide compensation if something goes wrong. This requirement may be written into a business contract, and you will likely be asked to provide them with proof of your insurance.
Other reasons why businesses seek E&O coverage
While some professions are required to have E&O coverage, many are not. However, businesses often consider this type of insurance for other reasons, such as:
1. To meet client expectations
Clients want to work with well-prepared and trustworthy businesses. Having E&O insurance and other forms of coverage might play a part in meeting these expectations. A policy signals to customers that you stand by your work and are prepared to defend your business, if necessary.
2. To protect their business finances
E&O claims and lawsuits can be expensive, particularly if you find yourself in a long, drawn-out legal battle. Your policy would cover your legal costs, including settlements and judgements ordered by the court, so you don’t have to pay them from your own pocket.
Compare E&O Insurance with BizInsure
E&O coverage may be an important part of protecting your small business. In some instances, it may be mandatory, so it’s advisable to check the E&O insurance requirements for your occupation and area before taking on your first client. If it is not required for you to do business, you might consider getting a policy to protect your business and meet the standards of your industry.
Ready to buy E&O insurance? Compare policies and get covered in just 10 minutes with BizInsure.