Errors and omissions insurance, also known as E&O insurance and professional liability insurance, helps protect you from lawsuits claiming you made a mistake in your professional services. This insurance can help cover your court costs or settlements, which can be very costly for your business to pay on its own.
What Does E&O Insurance Cover?
- Errors in services given
- Violation of good faith and fair dealing
- Inaccurate advice
- Attorney fees, which can cost an average of $3,000 to $150,000.
- Court costs, like reserving a courtroom or paying for expert witnesses.
- Administrative costs to put your defense together, such as paying office managers or court reporters.
- Settlements and judgments, which can cost a couple thousand to millions of dollars.
- It’s filed within your policy period or the extended reporting period
- The incident occurred on or after your retroactive date
Why Do You Need Errors & Omissions Insurance?
What Errors and Omissions Insurance Doesn’t Cover
- Illegal acts and purposeful wrongdoing, such as intentionally breaking the law or deceiving your customers or clients.
- Bodily injury or property damage that your business causes. For these kinds of claims, you’ll need a general liability insurance policy.
- Employee injuries or illnesses caused by their work. A workers’ compensation insurance policy can give your employees benefits to help them recover from a work-related injury or illness. Be aware that many states require this coverage if you have employees.
- Discrimination or harassment in the workplace that your employees file. Getting employment practices liability insurance can help cover these types of claims.
Errors and Omissions Insurance Cost
- Training your employees
- Checking your contracting system for quality control
- Communicating with customers regularly about issues to make sure they’re satisfied
- Business risk: If you’re in a higher risk industry, you’ll likely pay a more expensive rate. For example, a business owner of a financial consulting company that gives advice on investing millions of dollars will probably have a higher premium than a smaller financial advisor.
- Coverage limits: The higher your policy limits, the more coverage you’ll have, which usually means higher premiums.
- Claims history: Typically, you may pay more for your E&O coverage if you have a history of liability claims made against your business.
- Location: Rates will most likely vary depending on where your business is. For instance, you may have a higher insurance cost if you operate in a busy city.
Source: The Hartford, “What Is Errors and Omissions Insurance?” https://www.thehartford.com/ website. Accessed May 11, 2022. https://www.thehartford.com/professional-liability-insurance/errors-omissions-insurance
© Copyright 2022. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.
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