What is Errors and Omissions (E&O) Insurance?
E&O insurance, otherwise known as Professional Liability, can protect your business against claims of misrepresentation, mistake, or negligence. An E&O claim typically alleges that your services, products, or employees caused a third party to suffer some form of financial loss.
Regardless of whether you are at fault, litigation resulting from E&O claims can be expensive, time-consuming, and damaging to your professional reputation. Errors and Omissions insurance can help safeguard professional service providers against potentially devastating financial damages resulting from alleged negligence, an error in the delivery of your services, or other related liability claims.
Coverage is provided for:
- Attorney fees and other legal expenses
- Costs and expenses related to a settlement
- Costs and expenses related to a judgment
What does Errors and Omissions (E&O) Insurance cover?
An E&O policy can help protect your business against a variety of claims made against the delivery of your services, your products, or your employees. These include:
- Errors in your work, including mistakes or omissions
- Professional negligence
- Breach of contract
- Missed deadlines
- Failure to deliver services
Examples of the types of claims that E&O insurance generally covers include:
- Providing a client with incorrect advice that causes non-compliance with the law
- Flaws in your work that cause delays, work to be re-done, or create additional expenses for the client
- Alleged mistakes or negligence, even if you are not at fault
What is not covered by E&O insurance?
E&O insurance provides important protections to businesses, but there is a limit to what is covered. An E&O insurance policy will not cover events such as:
- Bodily injury or property damage of a third party: General Liability insurance covers events such as customer injury in your work premises or if you damage someone else’s property while doing business.
- Work-related injuries or illnesses: Worker’s Compensation insurance covers employee injuries and illnesses sustained during the course of their work.
Your policy documents will provide full details of what is and is not covered by your specific policy.
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Who needs Errors and Omissions (E&O) Insurance?
There are many types of businesses and occupations that may need an E&O insurance policy. Generally, if any of the following apply to you or your business, you may want to consider buying a policy:
- You provide a professional service to clients and customers
- You represent clients on their behalf
- You give professional advice to others that is used to make decisions
- You have employees who do any of the above
Minimum amounts of E&O insurance coverage are required for some occupations in many states. Some professional associations may also require their members to hold minimum levels of coverage for licensing or to practice their skills. Finally, clients will sometimes require subcontractors or freelancers to have E&O insurance before they will work with them.
How much does Errors and Omissions (E&O) Insurance cost?
The cost of Errors and Omissions insurance can vary greatly from business to business, even within the same industry or occupation. This is because insurers take many factors into consideration when calculating a policy’s premiums.
These considerations may include your:
- claims history
- geographic location
- length in business
- revenue size
- the size of your deductible
- the amount of coverage desired
- risk management procedures
Errors and Omissions (E&O) insurance FAQ
Why Is Errors and Omissions Insurance (E&O) important?
Errors and Omissions insurance can be an important part of protecting your business finances and professional reputation.
Lawsuits are expensive. The costs of defending your business or reputation in court can quickly add up, particularly when a case drags on for months or years. Even a baseless claim may result in thousands of dollars’ worth of legal fees that could financially devastate your business, or even force you to close shop.
E&O insurance could prevent this from happening by covering the legal costs resulting from certain liability claims, up to your limits of liability. It also provides coverage for settlements and judgements, which can also negatively impact your business (and even personal) finances.
Is Errors and Omissions Insurance (E&O) expensive?
BizInsure offers policies from as little as $47/month, depending on the potential exposure you face and the amount of coverage you require.
However, many factors could impact the cost of your E&O Insurance policy. These include your industry, claims history, the amount of coverage you need, as well as other relevant considerations.
Comparing quotes for E&O insurance can give you a better idea of how much a policy that meets your unique business needs will cost.
Do clients require Errors and Omissions (E&O) insurance coverage?
Yes, some clients may require you to have Errors and Omissions insurance coverage before working with them. They may ask for your certificate of liability insurance (COI) to prove that you have this insurance and verify how much coverage you have. This requirement is often written into the business contracts that both parties sign before work can begin.
If something goes wrong while you are working for a client, E&O insurance can provide them with greater peace of mind that certain liabilities or losses will be covered. Knowing that you already have this coverage before they start working with you may also give clients more confidence in hiring you. An E&O insurance policy signals that you value your professional reputation and are prepared to defend it, if necessary.
What is the difference between Errors and Omissions and Professional Liability insurance?
There is no difference between Errors and Omissions and Professional Liability insurance. The two names are often used interchangeably, though E&O insurance is typically used more for certain occupations (such as accountants or real estate agents).
Both E&O insurance and Professional Liability insurance provide coverage for a variety of liability claims, such as mistakes, omissions, and breach of contract. Both will pay the legal expenses resulting from a claim, such as court costs, settlements, and judgements. Both provide this protection regardless of whether you are at fault.