Errors and Omissions Insurance, also referred to as E&O Insurance is a form of Professional Liability Insurance.
Errors and Omissions Insurance is purchased by companies and professionals for instances when a client claims that they did not get the expected or promised results from the service or advice the professional provided to them.
This type of insurance is usually carried by professionals such as accountants, architects, engineers, and even financial advisers. In fact, any field where services and or advice is offered for a fee can benefit from a policy like this. This extends to many professions including, but not limited to fields such as wedding and event planners, commercial printers, travel agents, computer programmers and any business with exposure to errors and omissions.
What Is Covered By Errors And Omissions Insurance?
Most policies of this sort will cover settlements and unfavorable judgements, as well as legal defense costs. Financial losses for a client can add up to an expensive claim in many industries, and a good errors and omissions policy is worth buying for many businesses.
Imagine a travel agent or wedding planner puts together a $50,000 wedding and honeymoon for a client and list of 100 VIP guests on a tropical island.
What happens if the hotel rooms are booked for the wrong date and the guests have nowhere to stay when they arrive? Do you think a ruined wedding and honeymoon could result in a lawsuit for this travel agent? Can you put a price tag on a lifetime event such as this? My guess is the client could, and I have a feeling it could go well over the $50,000 invested! This business had better have errors and omissions insurance.
Remember, claims like that are not covered under general liability insurance. Without E&O insurance, this business might have to pay for everything out of pocket, including any judgement or settlement that may arise from the mistake. And even if the business or professional is found NOT to be responsible for the mistake, the legal fees to protect themselves could be quite expensive.
One more reason to take out an errors and omissions policy is that it makes for a good selling point. You can get more jobs and sign more contracts when your clients see that you are fully covered with E&O insurance. They will have the peace of mind knowing that there is recourse should something go wrong with the service you are offering.
Buying Errors And Omissions Insurance
Errors and Omissions insurance rates vary widely from insurance company to insurance company. Your cost will depend on factors such as the geographic location of your business as well as the class underwriters assign to your business. In some cases you can get a quite by simply filling out an application, but many underwriters want more specific information about your business before they can give you a premium quote.
When applying for E&O you should be at least somewhat prepared to give underwriters specific information about your business. This would include the risks associated with your industry, your history of claims and other pertinent information they ask for. These things need to be considered carefully by most insurers before they can give you an accurate E&O quote. An underwriter may even ask for copies of client contracts as well as information on your quality control and training procedures. If you have a history of claims against you or your business, they’ll likely want to know exactly what steps have may you taken to avoid future errors that led to those claims.
When it comes to Errors and Omissions insurance prices you need to remember that no two businesses are the same. That’s why there is no one-size-fits-all errors and omissions insurance policies. For this reason alone, it is very important to get multiple quotes from multiple commercial insurers. This will allow you to compare policies paying careful attention to limits and exclusions before deciding where to buy E&O insurance for your business.
While the process of buying E&O can seem time consuming, in most cases it is worth the time you put in personally, or the time you pay someone else to handle it all for you. You may not think so while you’re shopping for insurance and reading quotes and reviewing contracts, but you’ll appreciate having the liability protection when someone brings a claim against you or your business. The peace of mind that comes from knowing you’re covered for mistakes is reason enough to get a good policy from a respected and reliable insurer.