Errors and omissions insurance (also known as E&O insurance or professional liability insurance) is a type of coverage that provides protection against claims alleging that your business made a mistake or failed to deliver on its promises. If you are a small business owner, having this type of commercial insurance in place can help protect your business in the event of a claim. In this post, we'll explain what errors and omissions insurance is, how it works, and why it's so important for small businesses.
Key takeaways on errors and omissions insurance
- Errors and omissions insurance protects business owners financially against mistakes and negligence – this includes implications regarding the services or advice you provide.
- In some cases, this type of coverage is also known as E&O insurance, professional liability insurance, professional indemnity insurance, and malpractice insurance.
- To get E&O coverage, it's important to shop around for the best policy. Every business need is different, so be sure to do your research and consult a broker for guidance.
- Common mistakes when it comes to errors and omissions insurance include being overinsured or underinsured – or worse: having no coverage at all.
What is errors and omissions insurance?
Errors and omissions insurance is important for small business owners because it protects against mistakes or negligence that might occur during their regular daily operations, such as providing a service or giving advice. In other words, if your services end up leaving someone worse off financially than they were before working with you, E&O can help cover any unexpected legal expenses you may incur due to being sued. Being insured gives peace of mind when running a business and ensures that unexpected bumps won’t derail your operations.
Examples of errors and omissions insurance claims
An E&O policy can cover you for many different scenarios – here are a few small business cases in which a policy would come in handy:
- As an accountant, you make an auditing error that causes your client tax implications.
- As a photographer, you lose the memory card holding all your client's wedding photos.
- As a business consultant, you don't meet your client's project expectations on time.
Different names for errors and omissions (E&O) insurance
Errors and omissions insurance is also sometimes known as professional liability insurance, professional indemnity insurance, or malpractice insurance if it applies to a professional service such as law or medicine. In some cases, errors and omissions insurance is referred to as third-party liability because the coverage extends beyond the business owner and encompasses third parties who may be affected by their conduct.
While there are some subtle differences between these names, this insurance policy is an essential protection mechanism that can help buffer the financial impact of legal costs associated with safeguarding reputation and protecting your business from costly lawsuits, so every small business owner needs to understand this important concept.
Why do small business owners need errors and omissions insurance?
Errors and omissions insurance is an important form of protection for small business owners. It can provide a financial defence in the event of unintentional mistakes or negligence that causes harm to a client, such as errors made in advertising, design or advice. By securing this kind of coverage, entrepreneurs can maintain peace of mind knowing that their business can bounce back if formally charged with a valid legal claim. With errors and omissions insurance, small business owners are more protected against potential losses resulting from claims made by current and former clients.
How do I get errors and omissions insurance for my small business?
For small business owners, errors and omissions is an incredibly important type of commercial coverage. It can protect owners from financial loss if a product or service they provide to their customers fails to meet the customer’s expectations, is negligent, or has caused some kind of injury.
So how can these owners get this kind of coverage? Shopping around for business insurance is key – make sure to compare the cost and the policy protections available from different companies. Get advice from other small business owners to hear what their experiences have been. Look online for ratings and reviews of insurers with errors and omission policies. Treat finding errors and omission coverage like any other major purchase – be informed, ask questions, and do your research, so you don't miss out on getting the best deal that suits your individual needs.
Secure your errors and omissions insurance policy today.
Common E&O insurance mistakes
One of the most significant blunders that small business owners can make with errors and omissions insurance is not having it in the first place. This important type of insurance helps to protect businesses from the financial burdens of clients suing for professional mistakes or negligence. Without this type of coverage, a single claim can ruin a small business if they don't have enough assets to fairly compensate its client.
Another mistake often made is misguided spending; many businesses purchase an errors and omissions policy without taking into account their unique exposures and needs, likely leaving them over or underinsured. For example, for those in creative areas such as writers and graphic designers, intellectual property claims can be added to customized policies with particular coverage requirements.
Small business owners should always consult a knowledgeable insurance broker before making any decisions to ensure that they are getting the right type and amount of coverage for their situation.
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