How To Obtain Errors And Omissions Insurance Coverage
Everyone makes mistakes.And if you own a small business that charges a fee for a service, a mistake can be extremely costly.
It could be an accountant or consulting firm that gives bad advice, putting themselves at risk of a lawsuit.
Similarly, a hair salon or printing company that fails to deliver on behalf of its client may face legal ramifications.
Even if the claim is without merit, legal fees can be costly and jeopardize your company’s finances.
This is where errors and omissions insurance may come in handy.The best small business insurance companies provide valuable coverage types that can assist you in recovering from professional errors.
What Exactly Is Errors and Omissions Insurance – E&O Insurance?
Errors and omissions (E&O) insurance is a type of liability insurance that protects your company from claims of errors in professional services, such as services that are late, never delivered, or are inaccurate.
Professional liability insurance is another name for E&O insurance.
Here are some E&O claim examples:
- A real estate agent fails to disclose important property information.
- The strategy of a public relations firm produces a negative reaction.
- A marketing consultant gives advice that leads to revenue loss.
- A tax preparer makes a mistake, resulting in a penalty.
- A contractor does not finish a project on time.
What Is Included In Errors and Omissions Insurance Coverage?
Every type of business makes mistakes.Aside from actual errors and omissions in work, here are some mistakes that could lead to a customer suing your company.
- A breach of good faith and fair dealing
- False or incorrect advice
If your company is hit with an errors and omissions claim, you may be required to pay legal defense costs, including court costs and attorney fees, as well as any settlements or court judgments.
Depending on the nature of the claim, you may face disciplinary hearings before a regulatory or licensing board.
You may incur a loss of earnings while defending yourself against an errors and omissions lawsuit due to the time spent in court and on depositions.All of these expenses are covered by errors and omissions insurance.
What Is Excluded In Errors and Omissions Insurance?
Errors and omissions insurance does not cover employment practices such as wrongful termination or harassment.To cover these expenses, you’ll need employment practices liability insurance.
If you are sued, E&O will not cover patents or trade secrets that you have taken without permission.
If you’ve stolen intellectual property, a general liability policy may provide some protection.
An errors and omissions policy would not cover bodily injury or property damage caused by your company.
A business liability insurance policy would be required for these claims.
Workers compensation insurance covers work-related illnesses and injuries.
Personal identifiable information lost or stolen by your company is not covered by errors and omissions insurance.
A data breach insurance policy would assist in covering these expenses.
Who Should Get Errors and Omissions Insurance Coverage?
In certain states and where licensing boards require it, you must purchase errors and omissions insurance.
More than ten states, for example, require real estate agents to show proof of errors and omissions coverage before receiving their real estate licenses.
Aside from real estate agents, here is a list of businesses that can benefit from professional liability insurance.
- Advertising firms
- Designers of graphics
- Interior designers
- Business and management consultants
- Preparers of tax returns
- Professionals in technology
- Travel brokers
What Is the Cost of Errors and Omissions Insurance Cover?
According to Insureon, the following are the costs of E&O insurance.
- The average monthly cost of errors and omissions insurance is $65.
- Approximately half of small business owners pay between $500 and $1,000 per year for E&O insurance.
- Almost 20% of small business owners spend less than $500 per year on E&O insurance.
The average cost of E&O insurance by profession.
Your E&O cost will be affected by the risk associated with your industry.Here’s a look at how median annual costs differ by profession.
|By Profession||Median Yearly Cost|
|Media and advertising||$845|
|Real estate professionals||$665|
|Consulting or Consultants||$650|
|Finance and accounting||$400|
Source of this information is Insureon
The cost of errors and omissions insurance coverage is determined by several factors, including:
- The size of the company and the number of employees
- The company’s earnings
- Your industry and the types of risks you face
- State and location of the company
- The company’s previous claim history
- The E&O insurance limits you have chosen
How Does Errors and Omissions Insurance in Technology Work?
If you work in technology, you may be able to purchase an errors and omissions policy tailored to your industry.
Technology errors and omissions insurance coverage can cover legal and other expenses incurred as a result of customer claims.
Here are some examples of when technology E&O insurance would be beneficial:
- If the software you sold had flaws that corrupted a client’s billing information
- If the equipment you installed broke down and a customer was unable to place orders,
- If you create a website that looks too similar to a competitor’s website;
- if you miss important deadlines when developing a new technology product, resulting in a loss of profits;
- If you sell the incorrect product to a customer which made their system to crash.
The following types of technology professionals may benefit from technology E&O insurance:
- Companies that manufacture computer electronic components
- Consultants in computer science
- Providers of Internet access
- IT consultants
- Developers of software
- Website designers
Cyber Liability Insurance vs.Technology E&O Insurance
A cyber liability insurance policy can help a business protect itself from cyber attacks and data breaches.
Assume that some confidential customer information has been leaked from your company’s database.
If a customer files a claim against your business, cyber liability insurance will assist in covering the costs.
Technology errors and omissions insurance coverage, on the other hand, would cover instances of negligence and product failures, as well as errors and omissions made by your technology company.
Technology E&O coverage comes in When you had a hand in what went wrong for a customer, your E&O coverage kicks in.Your company is being attacked by an outsider via a data breach or cyber attack, which requires cyber liability insurance coverage.
Find more useful and other related articles on E&O coverage here.