E&O, also known as errors and omissions insurance, is a form of professional liability insurance that covers companies against claims of professional service mistakes. This includes services that are never delivered, that are late, or that are that are inaccurate. For example, if a financial advisor gives incorrect advice that leads to financial losses for a client, E&O insurance can cover the costs associated with legal defense and settlements.
It’s like having a backup plan to help professionals navigate unexpected challenges and keep their business running smoothly. It also provides support during regulatory or licensing board hearings. Even if a claim against your company turns out to be baseless, legal fees can still be costly and potentially harm your company’s finances. So, E&O coverage steps in to help you out.
Who needs E&O Insurance?
Errors and omissions insurance is helpful for various businesses and professionals, such as real estate agents, consultants, and accountants. It protects them from mistakes or oversights in their work. This coverage is also essential for medical professionals like doctors, as is malpractice insurance, which is a type of E&O insurance.
It shields them from claims related to professional negligence. However, it’s essential to remember that errors and omissions in insurance have deductibles and coverage limits. And does not cover intentional harm or criminal acts.
Just so you know, in some states and where licensing boards demand it, you’ll need to purchase errors and omissions insurance. For instance, over 10 states mandate that real estate agents must have errors and omissions coverage before obtaining their licenses.
Even if your state doesn’t demand E&O insurance, it’s smart to think about getting it. Without this coverage, you might end up with big bills to pay if you’re sued for a mistake.
What Does E&O Cover?
In general, E&O covers the main errors and omissions in professional work and other mistakes. This includes misrepresentation, negligence, and inaccurate advice, which could lead to financial harm for clients. For instance, if a real estate agent provides misleading information about a property or a financial consultant offers inaccurate advice, it results in lost revenue. E&O insurance covers the associated legal defense costs and settlements.
Without this insurance, businesses could face hefty expenses and potential disciplinary actions from regulatory boards. This insurance helps mitigate these risks by providing financial support for legal proceedings and protecting professionals’ livelihoods.
What Does E&O Not Cover?
Common issues are not covered by errors and omissions insurance. These exclusions include the following:
- Bodily injury or property damage your business causes will be covered by E&O. You will need a business liability policy to cover these claims.
- Trade secrets and patents that you took without the owner’s permission won’t be covered by the policy if you are sued. You may opt for general liability insurance for protection if you steal intellectual property.
- For work-related injuries and illnesses, you will need to go for workers compensation insurance.
- Personal identifiable information that gets stolen or lost by your company is not included in the errors and omissions coverage. You will need to go for data breach insurance to cover the costs.
- Employment practices, including wrong termination and harassment, won’t be covered by the E&O insurance policy. You will need to purchase an employment practices liability insurance policy to cover these costs.
Errors and omissions insurance won’t help if you’re involved in criminal activities. It also won’t cover other types of damage that are usually taken care of by different insurance policies.
Is E&O Insurance Expensive?
The price of E&O insurance can vary based on factors like the type of business, company size, and past claims. Typically, it may range from $500 to $1,000 per employee for one year.
Why is Errors and Omissions Insurance important?
If a client suffers a loss because of a mistake made by a financial professional during any part of the process, they can take legal action. Errors and omissions insurance helps cover the legal costs and any compensation the client might receive if they win the case.
Where can I Purchase E&O Insurance?
If you have purchased the business owner’s policy, you can just add this policy to your BOP. This is much cheaper than buying a separate policy. You can also compare quotes among various companies to purchase errors and omissions policies. Here is a list of the top companies that sell the policy:
- Berkshire Hathaway
- Chubb
- Markel Insurance
- Nationwide
- Next Insurance
- Progressive
- State Farm
- The Hanover
- The Hartford
- Tokio Marine
- Travelers
- Acuity
- Allianz
- Allstate
- AmTrust Financial
- Auto-Owners
- Axis Insurance
- Westfield Insurance
- Cincinnati Insurance
- Clear Blue Insurance Group
- CNA
- Frankenmuth Insurance
- Geico
- Hiscox
- Liberty Mutual
Getting errors and omissions insurance can provide valuable protection for your business against potential mistakes or oversights. While it involves a cost, the financial security and peace of mind it offers may outweigh the expenses. Especially considering the potential legal fees and damages you could face without it. Ultimately, the decision to invest in E&O insurance depends on your business’s specific needs, risk tolerance, and budget.