Human is to err! Have you met a single soul that has not committed a single mistake in his whole life? No, right! Humans err! But errors in professional work can lead to hefty lawsuits. But as you know, errors and omissions insurance is there to help you. So, if you too are wondering, how does errors and omissions insurance protect my business, you are at the right place!
Here is a whole article on why a business needs E&O insurance, how it protects them, and lastly, what exactly this policy covers and doesn’t.
So, let’s dive straight in!
Why Does A Business Need E&O Insurance?
A business needs this insurance for protection as well as business growth. Many states make it mandatory for some professions like doctors and attorneys to carry this insurance. However, small businesses should invest in E&O insurance for the following reasons.
#1. It Offers You Protection
Errors and Omissions insurance gives you protection against a lawsuit. This makes sure that you don’t have to pay legal costs out of your pocket. The costs it will pay are:
- Legal defense cost
- Lawsuit settlement charges
- Judgment fees
- Attorney fees
#2. Covers The Gray Area Left By Other Insurances
Errors and Omissions insurance covers the gray areas general liability insurance leaves. General liability insurance covers bodily harm and property damage costs incurred by a client due to your business or services. But, it does not offer coverage for service malpractice or professional mistakes.
E&O insurance covers such mistakes!
#3. Required By Clients
Often clients need you to carry E&O insurance.
Insurance assures them that they are protected even if you don’t deliver the promised service. Undoubtedly, it is an added advantage if you have E&O insurance, especially in a technical field.
#4. It Covers COVID-19 Related Service Delays
COVID is a harsh reality, and almost all of us are suffering in some capacity due to it.
But E&O insurance covers any lawsuit if you cannot deliver the promised service due to the pandemic.
However, this coverage is not offered by all insurance companies. Thus, check with your insurance provider for more details.
How Does Errors And Omissions Insurance Protect My Business
The E&O insurance provides coverage on a complicated set of issues. Some examples of when a client can file a lawsuit against a business are:
- Say you own a web designing company. Now another company feels that your designs are a little too similar to their trademarked design, and they can sue you for this!
- Suppose you are a real estate business. And your client finds some defect in the house design after the deal is closed. Now, he might sue you for your negligence.
- Another example could be a personal branding company hired to rebrand its image, and they promise specific projected results but fail to achieve them. The client can sue them for underdelivering the work.
- Lastly, an architect from an architectural company makes a flawed design while designing the blueprint of a house. This mistake can again result in a lawsuit!
I can go on and on. Every business has a hundred instances where an E&O insurance policy can protect them! And this policy comes for virtually every industry.
What Does An E&O Insurance Covers?
Suppose a real estate agent unintentionally mentions the wrong square foot area of a house on the contract document. The owner can sue this agent for misrepresentation. In such cases, E&O insurance will cover the cost of the agent’s defense in the courtroom.
Say you are a small business providing IT services to their clients, and a data breach occurs out of your client’s company database while in your charge.
It may or may not have happened because of your mistake, but the client can sue you for negligence!
#3: Inaccurate Advice
Advisory businesses like those that provide business advice or legal advice stand in high-risk waters.
They can be sued big time if anything goes wrong due to their advice!
#4: Missed Deadline
Anybody can miss a deadline.
Say, your project manager fell ill and the software he was in charge of was delivered late.
But the law allows the client to file a lawsuit against you, as the missed contractual deadline caused him a financial loss.
Observing the above case scenarios, getting errors and omissions insurance is advisable to protect yourself!
What Does E&O Insurance Not Cover?
E&O insurance covers your professional mistakes and negligence. However, some cases it does not covers are,
- Bodily injury and property damages. General Liability insurance covers them.
- E&O insurance also does not cover you if you are accused of stealing an Intellectual Property Right.
- It also does not cover you if your workers file for a harassment case or sue you for a work-related injury. It would help if you had Workers’ Compensation Insurance for such instances.
How Much Does E&O Insurance Cost Your Business?
Errors and Omissions insurance premium depends on several factors. These factors differ slightly for different industries. But most of them revolve around,
- Your Policy Limits
- Your Business Turnover
- The number of your employees
- Your Business Equipment
- Whether you buy the policy online or offline
- Your Business Location, etc.
For a small business, the average cost of E&O insurance can range anywhere from $42 to $59 per month.
In A Nutshell…
You should definitely invest in Errors and Omission insurance if you own a business. Anybody can make mistakes. Furthermore, you can find yourself amongst lawsuits even when you are not at fault!
Thus, as it is said, it is better to be safe than sorry. E&O insurance can save you from expenditures of millions of dollars on lawsuits!
I am wrapping up my discussion on how Errors and omissions insurance can protect my business here. Let me know if you have any questions or suggestions. Write them down in the comment section below!
Have you bought E&O insurance for your business? Does it cover everything we listed in this article?
I am all ears and waiting!