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Errors and Omissions Insurance
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What is errors and omissions insurance?
- Errors and omissions insurance
Errors and omissions insurance (E&O) helps cover the cost of a lawsuit if a client claims your work was inaccurate, late, or never delivered. It’s sometimes called professional liability insurance.
Does your small business need errors and omissions insurance?
If you provide professional advice or services to clients, you likely need this policy.
Your clients might require errors and omissions insurance in the terms of a contract. And it’s strongly recommended for professionals who make a living off their expertise.
E&O protects your business if you’re accused of a mistake, oversight, or professional negligence. This insurance will cover legal defense costs related to the lawsuit.
An errors and omissions policy can pay for court costs, settlements, and judgments. You’ll typically pay a deductible, and your insurance provider will pay legal expenses up to your coverage limit.
Do you need E&O if you’re careful and avoid making mistakes?
Being careful doesn’t make you immune to lawsuits. You still need E&O insurance to protect against clients who sue for no good reason.
Besides, even the most meticulous professional makes a mistake from time to time. And when that error causes your client to lose money, they’re less likely to be understanding.
The client’s negative experience could lead to a costly lawsuit. Even if the lawsuit is frivolous and dismissed, you’ll still have to pay for a legal defense.
An errors and omissions insurance policy typically covers:
- Work mistakes and oversights
- Undelivered services
- Breach of contract
- Missed deadlines
- Professional negligence
Most E&O claims are straightforward, such as failing to deliver a product or service as promised. However, claims of professional negligence can be more complicated.
When a client hires you to provide a specialized skill, they’re entitled to a reasonable standard of care. If your work falls short of this standard, the client can sue for professional negligence.
Do clients require errors and omissions insurance coverage?
Some clients do require errors and omissions coverage. It guarantees that you’ll be able to pay a settlement or judgment if you fail to deliver on your promises.
Before they’ll work with you, these clients will often request a certificate of insurance that proves you carry E&O coverage.
Why is it important to keep your E&O policy active?
If you cancel your E&O policy, your business becomes vulnerable to client lawsuits.
A typical E&O policy is claims-made, meaning the insurance company pays claims only if they’re filed when the policy is active. And the incident must have occurred after a retroactive date that clearly defines the day coverage began.
To collect your insurance benefits, your policy must be active both:
- When an alleged mistake occurs, and
- When the claim is filed
All claims-made policies come with restrictions on covered claims, which is why it’s essential to maintain continuous coverage.
How much does errors and omissions insurance cost?
Your cost is based on a few factors, including:
- Amount of coverage
- Claims history
- Industry risk factors
- Business size
- Day-to-day operations
E&O insurance costs an average of $59 per month. This is based on the median cost of policies. And 18% of Insureon’s small business customers pay less than $42 per month for their policies.
How does errors and omissions insurance protect common professions?
Insurance agents
Errors and omissions insurance for insurance agents can protect against an oversight that left a client vulnerable to liabilities. It also covers bad advice that led to inadequate coverage. Some clients may require proof of E&O insurance before they agree to work with you.
Real estate agents
Errors and omissions insurance helps real estate agents and brokers pay for lawsuits over failure to close, mismanagement, disclosure errors, or other professional issues. Unless you can prove you carry an E&O policy, some clients, buyers, or sellers may refuse to work with you.
Tax preparers
E&O for tax preparers covers the costs of lawsuits over missed deadlines, accounting errors, or lost documentation. This policy offers indirect protection for the client if there’s a mistake in their taxes. That’s why some clients will ask for proof of insurance before they’ll use your financial services.
IT professionals
Errors and omissions insurance protects IT professionals from lawsuits over contract disputes, data breaches, coding errors, and more. Some clients will only work with tech companies that can prove they have an active E&O policy.
Does errors and omissions insurance cover losses related to the coronavirus (COVID-19)?
If a client sues because you were unable to meet a deadline or complete a project due to the coronavirus, it's possible that your errors and omissions policy would provide coverage.
But most business insurance policies exclude communicable disease coverage, which means that losses related to COVID-19 are not covered.
To find out if you're eligible for a claim, please contact your insurance company's claims department.
What’s the difference between errors and omissions and professional liability insurance?
Errors and omissions and professional liability insurance offer identical coverage. While the two policies are the same, different industries use different terms to refer to the same coverage.
Insurance agents, real estate agents, tax preparers, and IT professionals use the term errors and omissions insurance. But accountants, architects, consultants, and engineers call this policy professional liability insurance.
Lawyers and doctors refer to the same liability policy as legal or medical malpractice insurance. (While Insureon doesn’t offer quotes for malpractice insurance, our licensed agents are happy to provide doctors and lawyers with other essential business insurance policies.)
What’s the difference between errors and omissions insurance and general liability insurance?
Errors and omissions insurance and general liability insurance both protect small business owners against legal costs, but they cover two different types of lawsuits.
Errors and omissions insurance covers client disputes over the quality of your professional services. General liability insurance covers customer bodily injuries, customer property damage, and advertising injuries.
Read more about errors and omissions vs. general liability insurance.
How do I get an errors and omissions policy?
For free errors and omissions quotes, complete our easy online insurance application.
Once you’ve submitted your application, our expert insurance agents can help you find the E&O coverage that meets your needs. You should be able to get coverage quickly and receive a copy of your errors and omissions insurance certificate on the same day.
Once you have insurance coverage, you can access your certificate of liability insurance online.