Errors and Omissions Insurance
If you have a career in law, medicine or finance, it is likely that you have heard of malpractice insurance or professional liability insurance. These kinds of insurance coverage can protect professional service providers, like life insurance agents, in a variety of fields from the costly expense of errors to financial aid in a lawsuit brought on by a patient or client. Despite a slightly different name, errors and omissions insurance offers the same kinds of coverage benefits meant to shield your business from legal fees or other kinds of expenses related to a mistake . Simply put, having an errors and omissions insurance policy can mean the difference between treading the bumpy waters of a costly error or lawsuit, or drowning in legal expenses and payouts.
What is Errors and Omissions Insurance?
Errors and omissions insurance, also called E&O insurance, acts as a financial safeguard in the event of an error in the services you or your company provides. E&O insurance is commonly geared towards working professionals who offer some kind of service, such as bankers, doctors, lawyers, and architects, but nearly every business owner who offers a service can benefit from E&O insurance.
Everyone makes mistakes, but on occasion, professional service providers can make costly errors that lead to expensive losses, reimbursement to a client or lawsuits. This is where errors and omissions insurance shines. It understands that mistakes do happen and offers help in righting the situation in a way that rectifies the client and keeps your business from going into the red. E&O insurance is a strong way to financially protect yourself and your livelihood while covering errors you have made or that a client believes you have made.
How Does Errors and Omissions Insurance Work?
The point of errors and omissions insurance is to provide some financial protections in situations where a client or company claims you failed to provide a service properly or were negligent while doing so. In many cases, these situations arise after the service has already been completed or if an error happens while doing so.
Error and omissions insurance is similar to many other kinds of business and personal insurance policies, but is generally offered in two formats: claims-made or on an occurrence basis. These two different kinds of policies have limitations on when you can use your insurance.
Claims-made basis: With this kind of policy, you file a report (also called a claim) with the insurance agency handling your policy for any costly mistake that crops up during your coverage period. In many claims-made policies, you cannot file a claim for situations that happen before the policy started or after it ends.
Occurrence basis: This kind of policy is common for medical professionals because it provides additional wiggle room in terms of time. Occurrence basis policies will cover claims so long as the initial mistake happened while the policy was in place, even if a client or patient complaint comes some time later and the policy has ended. But beware that many occurrence-based policies have “sunset provisions,” meaning that you cannot submit a claim after a certain amount of time has passed.
Generally, E&O insurance policies can offer two kinds of assistance: indemnity and expenses. The amount of coverage you may receive for both types of insurance coverage vary, but depending on the work you do, it is important to understand the minimum level of coverage you may need to financially protect your business.
Indemnity coverage: This kind of coverage provides financial aid in situations of a lawsuit where a client or patient is seeking damages for subpar or negligent services. The policy may cover up to a certain amount in damages that can be paid out to the client as required by a court.
Expenses: In situations where your company has made a costly mistake, expense coverage can help with the fees of fixing the work or mistake. This kind of coverage can also be used towards the cost of legal assistance and court fees if necessary. Policies that help with expenses may set limits as to how much can be covered.
Understanding your levels of coverage for your individual E&O policy can help ensure you are protected before you ever need to use it. While each policy varies, you can expect errors and omissions insurance to generally cover civil and legal situations such as:
- Providing poor legal advice
- Failing to follow a client’s instructions, leading to financial or legal ramifications
- Making errors in a client’s financial account or neglecting an account
- Giving the wrong patient diagnosis
- Finishing a job greatly outside of the budget
- Failing to deliver goods or the correct items
- Being negligent while providing services, leading to injury or unexpected results
- Failing to catch a printing error or mistake during an audit
- Breaching confidentiality
Who Should Get Errors and Omissions Insurance?
Errors and omissions insurance is an option for any service provider or business owner who faces some kind of risk when offering a service. While medical, legal and financial professionals are common E&O policy owners, businesses in other industries can benefit, too, including:
- Media companies
- Advertising and public relations firms
- Printing and graphics companies
- Life Insurance Companies
- Shippers and transportation companies
- Electricians, HVAC specialists and plumbers
- Wedding and event planners
- Consultants and advisors
- Architects and engineers
- Technology and communications companies
When it comes to determining if E&O insurance is right for you, its best to analyze your particular business risks. Any business transactions involving expensive or time-sensitive materials or delicate situations may be worth the added protection errors and omissions coverage offers.
What Does Errors and Omissions Insurance Cost?
Like most forms of insurance, there is no set cost for an errors and omissions insurance. Most providers of this kind of insurance require an application and may go so far as to use insurance underwriters to analyze your individual and specific risks before determining how much coverage they can extend. For business owners with a history of lawsuits or extensive loss, a premium could be higher than companies with risk protections put in place.
If you are unsure of where to start the E&O insurance process, let PolicyZip help out. Call 844-627-7700 or fill out the form below to speak with an errors and omissions insurance specialist who can determine your needs and options.