Do you feel the pressure of perfection? And trust me, it is real. An erroneous work can lead to financial or reputational loss to your client, and they might sue you for the same. But there is a solution to the problem- Errors and omissions insurance.
Errors and omissions insurance protects you from such lawsuits.
It is also called professional liability insurance and is an essential part of a business. It is crucial in a world where minor errors often lead to big problems.
What Is Errors and Omissions Insurance Policy?
It is all in the name. Errors and Omissions insurance covers events related to legal matters.
It protects workers, companies, and other professionals against such errors and omissions, resulting in legal problems later.
For example, you are the owner of a software firm. And say, one of your employees codes an erroneous software. Now, your client can sue you, and if he does, it may result in many legal expenses.
But errors and omissions insurance covers all your legal costs and saves the day!
In these cases, Errors and Omissions insurance proves to be a boon as it protects you from the high legal, judgment, and settlement costs of the lawsuit.
What Does Errors and Omissions Insurance Cover?
#1: Misrepresentation of facts and factors related to the business
If any of your employees erroneously misrepresent your services, and if this act leads to loss or damage to your customer, the insurer will cover it!
#2: Any omissions while providing the details and facts about the business
While providing essential information about the business, any critical omissions may backfire, but E&O insurance covers it.
#3: Negligence in providing business and professional services
Say you are an accountant, and you negligently leave some error in the accounts, which causes your client financial loss. Now, if the client sues you, you have a cover!
#4: Violation of good faith in business practices
Consider that you are a chartered accountant. If you miss the tax submission deadline, it can result in financial loss to the client, and he can sue you for the same.
#5: Inaccurate advice given to the customer while dealing with them
Say you are a business coach. If you provide a piece of inaccurate advice regarding your client’s business, you might get sued for financial loss and damage!
#6: Failure of maintaining the confidentiality of information
If you have sensitive information about a business and fail to maintain its privacy, you can be sued.
An example could be PR agencies. They know everything about their clients but can face lawsuits if they do not maintain secrecy.
#7: Breach of duty while providing services
If you do not fulfill all your duties as mentioned in the contract, you might face a lawsuit. But E&O insurance saves you from such cases!
#8: Any loss or damage to the documents while in your physical custody
Say you sold a property to your client, and you happen to damage the sale deal while in your possession, you might get sued.
#9: Unintentional infringement, including trademark and copyrights violation
If you unintentionally violate the client’s copyright and trademark policy, you again stand a chance to be dragged into a lawsuit.
What Is Not Covered By Errors And Omissions Insurance?
Errors and Omissions insurance covers all the scenarios when some erroneous service is provided. But some areas not covered by it include,
- customer injuries,
- contingent bodily injuries,
- employee injuries,
- claims related to employee discrimination,
- any damage to customer or business property.
The general liability insurance policy handles any claim for the above reasons.
Factors Affecting Errors And Omissions Insurance Cost
#1: Coverage limits
The limits of policy determine the coverage a business has. The higher the limits of the policy, the higher the coverage, and thus the premiums are also higher.
#2: Risks of business
The higher-risk businesses are expected to pay a higher premium. The business owner of a prominent financial consulting company will have to pay a much higher premium than a smaller financial adviser.
#3: History of claims
If the business has a history of liability claims, then the company will have to pay a higher premium.
The location of a business affects the premium and cost associated with Errors and Omissions insurance. For example, suppose the company is being operated in a busy city. In that case, the client may have to pay higher costs or premiums than the business operating in a small town.
Who Needs Errors and Omissions Insurance
The prospective users of Errors and Omissions insurance can be professionals, workers, and companies from different workplaces.
Most professionals who need this coverage work in financial industries like investments, real estate, accounting, and insurance. A mistake made is irreversible. Thus, it is advisable to buy an E&O Insurance policy.
In A Nutshell…
Errors and Omissions insurance is a game-changer in the insurance sector and is proving to be a blessing for most. Mistakes are a part of human life, and sometimes they cannot be avoided.
Sometimes the cost of liability claims can be so high that they can threaten business continuity. The legal expenses come out to be extremely high sometimes, and these can get out of control while settling out of the court.
Insurance has made life easy for working professionals by covering their risk of legal and financial troubles.
I hope the information provided above proves to be a useful one. In case of any doubts or suggestions, feel free to connect through the comment box. I will be happy to hear.