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.
As with general liability coverage, some clients may require you to carry E&O insurance before they sign a contract with you. To show a client that you are covered, request an E&O certificate of insurance. They gain peace of mind knowing they won't be held responsible for your mistakes or alleged negligence.
For example, an architect might win a client contract because their E&O insurance coverage shows they'll be able to weather a lawsuit if a mistake leads to financial loss.
When it comes to your small business, its success stems from your expertise, fulfilled contracts and happy clients. But what if a client is unsatisfied with the outcome you delivered? This is where a policy like errors and omissions can help.
So, what is errors and omissions insurance? Also known as professional liability insurance, E&O helps protect your business from lawsuits filed by unsatisfied clients.
This coverage applies to work mistakes and oversights, undelivered services, missed deadlines, and accusations of negligence.
Based on several factors including risk, business size, and claims history, the cost of E&O coverage can vary from business to business.
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Errors and omissions insurance covers the cost of lawsuits related to work mistakes, including:
Independent contractors aren't immune to making these kinds of mistakes, and you could still be sued even if you're not at fault. Even the most careful professional might have to muster a legal defense for a frivolous lawsuit, which is also covered by an errors and omissions policy.
Independent contractors can be held liable for mistakes that negatively impact their clients or the businesses they work for.
For example, say an IT consultant hired by a larger company recommends a much-hyped software as a service (SaaS) to one of its clients. Unfortunately, the recommended SaaS doesn't have a reliable backup feature and the client ends up losing valuable data. The client files a professional negligence lawsuit against the company and the consultant, too.
In a situation like this, contractors should have the insurance protection necessary to pay for their legal costs, including any settlements or judgments rewarded to the client. This lessens the burden on the businesses you work with, and could make you the preferred choice over an uninsured contractor.
Errors and omissions insurance and other liability policies often don't cover mistakes or accidents involving independent contractors or subcontractors working for your business. To protect yourself from lawsuits, you may want to require contractors to carry coverage.
Other policies, such as a commercial general liability policy, may let you add contractors to your policy as an additional insured, but that's not the case for errors and omissions coverage.
Independent contractors and small business owners might need additional commercial insurance policies, such as:
Complete Insureon’s easy online application today to compare errors and omissions insurance quotes from top-rated U.S. insurance providers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.