Paper has been valuable in our economy for a long time now. The Chinese invented paper money sometime around the 11th century; bills of exchange were used by almost all merchants in Europe during the Middle Ages; and by the 1700s, banknotes were the preferred form of currency for everyone.
Today, we are surrounded by important pieces of paper: cash, checks, order forms, contracts, and (of course) insurance policies. Running a business increasingly means pushing lots of paper, whether tangible or virtual.
So let's explore a few important documents that protect your small business, starting with an Errors and Omissions Insurance application.
Where It Begins: The Errors & Omissions Insurance Application
Errors and Omissions Insurance (aka E&O, Professional Liability Insurance, or Malpractice Insurance) steps in when a customer who is unsatisfied with your work sues your business. It pays for your lawyer's fees, settlements, and judgments — all of which would otherwise cost you some serious paper.
But to get this protection, you'll need to fill out an insurance application, which will ask you about the following:
- Your business's composition, including payroll, revenue, number and types of employees, and details about owners and executives.
- The relationships your company has with other businesses, including clients and subsidiaries.
- Your business's contracts and internal policies.
- Your commercial insurance and claims history.
Check out "Small-Business Owners: What to Expect When You Apply for Errors & Omissions Insurance" for a more detailed explanation of the E&O application process. Or, if you're ready to get started now, fill out an online insurance application.
What Documents Do I Need to Fill Out the E & O Application?
The following documents will come in handy when completing your E and O application:
- Recent balance sheets and projections for the next fiscal year.
- Form contracts and modified contracts you use with your largest clients.
- Insurance policies or Certificates of Insurance for the coverages your business already carries.
- Payroll sheets and documents detailing executive compensation.
- Your business's ownership interests in other companies.
- The documents legally registering your company as a corporation, LLC, etc.
Certificate of Liability Insurance: A Document That Wins Clients
When you obtain E&O coverage for your small business, you can request to receive a Certificate of Liability Insurance (here is a sample Certificate of Liability Insurance for your reference).
The certificate isn't a contract. Rather, the document…
- Is a handy one-page form that outlines your E&O coverage details, such as the contact information for you and the insurer, deductibles, policy limits, and a description of the scope of your coverage.
- Acts as proof of insurance for clients and other business partners who require you to carry E and O Insurance, which allows you to land contracts you otherwise couldn't.
- Strengthens your clients' trust when you list them as Certificate Holders, which means they get updates if your coverage lapses or changes.
See "What an Errors & Omissions Certificate of Liability Insurance Does for Your Small Business" to learn more.
Your E&O Policy: The Document That Safeguards Your (Small) Empire
Your E&O policy is a complex legal document that specifies the exact parameters of your coverage. The policy consists of the following parts:
- Declarations. This section of your policy is similar to a Certificate of Liability Insurance. It succinctly lists the basic details about your coverage and your insurer's contact information.
- Insuring Agreement. This contains the legalese defining your relationship with the insurer.
- Conditions. These are prerequisites you and your insurer must follow for the coverage to be effective.
- Endorsements. An "endorsement" is just an insurance-industry word for an amendment to your policy that changes or adds to the underlying agreement.
When you receive your E & O policy forms, make sure you completely understand them, and contact your insurance agent to discuss parts you're unsure about.