What is Errors and Omissions Insurance?
Errors and Omissions (E&O) Insurance is a form of liability insurance that provides coverage for businesses and professionals who offer their expert services. This type of insurance protects against claims of negligence or failing to perform a professional duty. In other words, it covers businesses and individuals from potential lawsuits that arise from mistakes or oversights in their work.
There are various types of Errors and Omissions Insurance policies, each tailored to the specific needs of the business or individual. For example, a technology company might require technology E&O insurance, while a financial advisor might require professional liability insurance.
What Does Errors and Omissions Insurance Cover?
Errors and Omissions Insurance provides coverage for a range of potential claims. These include allegations of professional negligence, misrepresentation, or breach of duty to clients or customers. Examples of situations that could lead to a claim include:
- A customer accuses a consultant of providing incorrect or incomplete advice, leading to a financial loss.
- A client claims that a software development company failed to deliver the agreed-upon software, causing harm to their business.
- A patient sues a healthcare provider for medical malpractice resulting in injury or harm.
E&O insurance covers the costs of defending against such claims, including legal fees and settlements. In addition, it can also cover any damages awarded to the plaintiff, minus the deductible specified in the policy.
Having Errors and Omissions Insurance can go a long way in helping professionals and small business owners protect their assets and reputation in the event of a lawsuit. Without proper coverage, an unexpected lawsuit could be financially devastating and potentially ruin a business.
What Does Errors and Omissions Not Cover?
While Errors and Omissions Insurance provides important coverage, it is important to note that it does not cover certain types of claims. Most E&O policies exclude coverage for intentional wrongdoing or criminal actions, as well as claims related to bodily injuries or property damage.
Something to consider is that E&O insurance policies typically exclude coverage for contractual disputes. This means that if a client sues a business for breach of contract, the lawsuit would not be covered by E&O insurance. This type of coverage can also often be added to a policy as additional coverage or as part of a separate policy.
How Much Does Errors and Omissions Insurance Cost?
The cost of Errors and Omissions Insurance can vary greatly depending on the level of risk and the amount of coverage needed. Factors that influence the cost include the type of business or profession, the level of experience and expertise of the professional, and the specific terms of the policy.
Generally, small businesses and solo entrepreneurs can expect to pay anywhere from a few hundred to several thousand dollars per year for E&O insurance. This cost may seem steep, but it is well worth the investment in the long run as it can save a business from serious financial hardship in the event of a lawsuit.
