Errors & omissions (E&O) insurance
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What is E&O insurance and who needs it?
E&O insurance protects specialized professionals from the legal exposures they face in their jobs. Also known as malpractice insurance and often equated to professional liability or professional indemnity insurance, this coverage protects professionals whose advice or actions have significant financial or health-related consequences.
You need E&O insurance if you work in a profession (for example, insurance agents, contractors, healthcare professionals, lawyers, and architects) with high client expectations and your advice or service has significant consequences for clients. This can be a risk even for contractors (professionals who aren’t employees of the organization they serve, but instead work on a contract basis and receive 1099 forms to document their income at the end of the year).
E&O comes in two forms, “claims-made” and “occurrence”:
Have assets, like inventory or equipment, that can be stolen or damaged.
Risk customer injury or property damage due to your operations.
- Claims-made. A claims-made policy provides coverage for an E&O claim made while the plan is active, even if the event leading to the claim happened in the past (with some exceptions). The plan must remain active to continue receiving coverage benefits.
- Occurrence. An occurrence policy provides insurance coverage as long as the incident leading to the claim occurred within the plan’s coverage period, e.g., a claim can be filed even after the policy has expired.
Why do you need E&O insurance?
Here are a few reasons why you might need E&O insurance:
Because even the perception of inadequate services could be enough to lead to a lawsuit, you need to ensure that you are protected (including legal representation) in case a customer sues you. E&O protects your business and/or personal assets from legal judgment.
Customers may require E&O insurance coverage to protect their interests and yours.
You need protection from claims associated with the services you provide, for example, if you are an architect drawing plans on a new construction.
For example, just like when you order a meal at a fastfood restaurant, when you buy the meal deal, it's cheaper than if you buy your sandwich, drink, and fries individually.
Simplifies the insurance process and makes it easier for you to manage multiple coverages in one business owner’s policy.
It’s invaluable to have the peace of mind that you are properly protected through a range of coverages included in one business owner’s policy so you can focus on growing your business.
What risks does E&O insurance cover?
E&O insurance covers a wide range of risks your business could face. Here are just a few examples:
A tax consultant may be sued under the claim that a client was given erroneous tax advice.
An investment broker could make a costly clerical error that results in financial loss for the client.
An insurance agent may misclassify a business, resulting in a lack of coverage of an incident for that business.
If cyber criminals hack a medical outpatient facility (ex., a dentist office) and confidential patient information is compromised, the business owner would be liable.
If a clothing boutique stores its employees’ social security numbers in the cloud and that data is compromised, the store owner is at risk of legal action by the employees.
If a logistics company is victim to ransomware after an employee unknowingly downloads a suspicious attachment, the financial burden can be heavy without cyber insurance.
What is the cost of E&O insurance?
The average annual cost of an E&O insurance policy can start at around $750 for a small business, but coverage costs will vary. Here are a few factors that can influence the price of an E&O insurance policy for your business:
What other coverage might a business need?
Though E&O insurance covers some of today's most common business risks, it is very specialized. Most businesses require more than that to protect themselves. Here are just a few other common examples of risks and coverages and why you may need them to protect your business:
Business owner’s policy insurance (BOP)
Business owner’s policy insurance provides comprehensive coverage by bundling multiple types of business insurance into a single policy. BOP insurance usually consists of general liability, commercial property, and business income interruption insurance. Bundling with a BOP policy saves you money versus purchasing stand-alone policies.
Commercial auto
A commercial auto policy covers vehicles used for business purposes, including cars, trucks, vans, and other vehicles owned or leased by your business.
General liability insurance (GL)
Covers a wide range of risks and can shield you from financial losses and legal expenses from customer injuries or damage to their property.
Cyber insurance
A cyber insurance policy protects you against the consequences of a cyber incident, such as data breaches, network security failures, cyber extortion (ransomware, for instance), and other cyber attacks.
Workers’ compensation (WC)
Workers’ compensation insurance protects employers and employees, covering financial needs in case of any workplace illness or injury. This insurance is required by law in most states.
How to get E&O insurance or other coverage
By now you understand how important it is to be properly insured. What’s next?
Call (380) 225-5242 to connect with an experienced insurance agent who understands the nuances of your business and industry.