Errors and Omissions Insurance: A Protective Small Business Shield

Kevin DanielsOct 11, 2022

Last Updated on June 16, 2023

No one is perfect, and professionals who advise clients are no exception. Sometimes they make mistakes, and these errors can be costly. That’s why it’s important to have professional liability insurance, which can help protect you and your business if you’re accused of making a mistake or professional negligence.

Errors and omissions insurance is designed to protect professionals from the financial damages that can result from errors or omissions in their work. Unfortunately, even the most careful professionals can make mistakes, and claims are not always fair or justified. When a claim is made, it can be costly to defend, even if the case is ultimately found in the insured’s favor.

According to a recent study, nearly 1 in 3 insurance agents face an errors and omissions claim each year. This type of claim can be very damaging to a business, both financially and reputationally. If you are an agent or consultant, it is important to be aware of the risks and take steps to protect yourself.

What is errors and omissions insurance?

Errors and omissions insurance (E&O insurance) is a type of professional liability insurance that protects businesses and individuals from financial losses related to errors or omissions in their professional services.

E&O insurance can help protect you from the costs of defending against a claim, as well as any damages that may be awarded if you are found to be liable. It can also help cover the cost of settlements or judgments, up to the limit of your policy.

While E&O insurance is not required by law, many businesses purchase it to help protect themselves from the potentially devastating financial impact of a claim. Professional groups and organizations often recommend that their members carry E&O insurance, and some clients may require it as a condition of doing business with them.

If you provide professional advice or services to clients, errors and omissions insurance can help give you peace of mind knowing that you are protected in the event of a claim.

Why is errors and omissions insurance important?

As a business owner, you want to protect your company from any potential risks that could lead to costly lawsuits. Errors and omissions insurance (E&O insurance) can help you do just that.

E&O insurance is a type of professional liability insurance that protects businesses from claims arising out of their professional services. It can cover damages resulting from errors, omissions, or negligent acts.

This type of insurance is important for any business that provides professional services, such as consulting, accounting, or financial services. If your company is sued for something like negligence or breach of contract, E&O insurance can help cover the costs of legal defense and any settlements or judgments against you.

E&O insurance can be an important part of your risk management strategy, helping to protect your business from potentially devastating financial losses.

Errors and Omissions vs. Professional Liability Insurance

When it comes to professional liability insurance, there are two main types of coverage: errors and omissions insurance (E&O), and professional liability insurance (PLI). Both types of coverage protect professionals from financial losses arising out of their work, but there are some key differences between the two.

E&O insurance is designed to protect professionals from claims of errors or omissions in their work. This type of coverage is typically used by professionals such as lawyers, accountants, and doctors, who can be held liable for mistakes or oversights in their work.

PLI insurance, on the other hand, is designed to protect professionals from claims of professional negligence. This type of coverage is typically used by professionals such as architects and engineers, who can be held liable for damages caused by their work.

So, which type of coverage is right for you? That depends on the type of work you do and the risks you face. If you are a professional who could be held liable for errors or omissions in your work, then E&O insurance is a good choice. If you are a professional who could be held liable for damages caused by your work, then PLI insurance is a good choice.

Errors and Omissions insurance (E&O) and Professional Liability Insurance (PLI) are two terms that are often used interchangeably. Either way, it’s important to make sure you have the right coverage in place to protect yourself from financial losses.

Who needs errors and omissions insurance?

Errors and omissions insurance (E&O insurance) is designed for businesses that provide professional services. This includes businesses such as:

Consultants
Lawyers and law firms
Accountants and accounting firms
Architects
Engineers
Accountants and tax preparers
Financial advisors and investment professionals
Real estate agents
Insurance agents

If your business provides advice or services to clients, you could be at risk for a professional liability claim. Even if you are careful and do your best to provide quality services, mistakes can happen. If a client feels that you have failed to meet their expectations, they could sue you for damages.

E&O insurance can help protect your business from the financial costs of defending against a lawsuit, as well as any damages that may be awarded if you are found liable. If you provide professional services, consider purchasing E&O insurance to help protect your business from potential risks.

What does errors and omissions insurance cover?

Errors and omissions insurance (E&O insurance) is a type of professional liability insurance that helps protect businesses from financial losses arising out of errors or omissions in the course of their professional services.

E&O insurance can help cover:

Legal defense costs
Judgments or settlements
Costs to rectify errors or omissions

Policies can vary, so it’s important to read your policy carefully and understand what is and isn’t covered. E&O insurance typically excludes claims arising from fraudulent or criminal acts.

What E & O insurance doesn’t cover?

E&O insurance is designed to protect businesses from claims arising out of their professional services. However, there are certain types of claims that are typically excluded from coverage. These include:

Bodily injury or property damage – E&O insurance typically excludes claims arising from bodily injury or property damage. If you or your employees cause physical harm to someone or damage their property, E&O insurance will not cover the resulting claims.

Intentional acts – Claims arising from intentional acts are also typically excluded from E&O insurance coverage. This includes claims that result from something you or your employees did on purpose, such as fraud or defamation.

Criminal acts – Criminal acts are also excluded from E&O insurance coverage. This means that if you or your employees are accused of a crime, such as embezzlement or money laundering, your E&O policy will not cover the resulting claim.

You should always read your policy carefully to understand what is and isn’t covered. Some policies may provide limited coverage for certain types of excluded claims, so it’s important to know what your policy covers.

What are the most common E&O insurance claims?

There are a few different types of errors and omissions insurance claims that are most common. These include:

1. Failure to perform – This type of claim is the most common and typically happens when an insurance agent or broker fails to perform their duties in a timely or effective manner.

2. Negligent advice – This claim is usually filed when an insured person or company provides inaccurate or misleading advice that results in financial damages for the claimant.

3. Misrepresentation – A misrepresentation claim can be filed when an insured person or company makes false or misleading statements that result in financial damages for the claimant.

4. Breach of contract – A breach of contract claim typically arises when an insured person or company fails to live up to the terms of a contract.

5. Violation of good faith and fair dealing – This type of claim occurs when the insured violates the good faith and fair dealing clause in the insurance contract.

6. Failure to disclose – A failure to disclose claim can be filed when an insured person or company fails to disclose material information that could impact the decision of the claimant.

7. Fraud – A fraud claim can be filed when an insured person or company makes material misrepresentations or omissions in order to obtain a benefit from the claimant.

6. Wrongful eviction or entry – This type of claim is filed when an insured person or company illegally evicts someone from their property or enters their property without proper authorization.

7. False advertising – This type of claim arises when an insured person or company makes false or misleading statements in their advertising that results in financial damages for the claimant.

8. Copyright infringement – This type of claim is filed when an insured person or company uses copyrighted material without authorization.

9. Negligence – hiring, firing, or supervision practices

10. Invasion of privacy – This type of claim is filed when an insured person or company violates another person’s right to privacy.

These are just some of the most common claims that are made against businesses in a variety of different industries. In today’s competitive world, there are few guarantees that a company will not be targeted by someone who has an issue with their product or service. Better protected than sorry.

How much does errors and omissions insurance cost?

The cost of errors and omissions insurance depends on a number of factors, including

Type of business – For example, a business that provides professional services (such as accounting or consulting) will generally have a higher insurance cost than a business that sells products.

Claims history – If a business has had previous claims filed against it, this will generally result in a higher insurance cost.

Location of the business – Businesses located in areas with a higher rate of lawsuits (such as California) will generally have a higher insurance cost than businesses located in other states.

There are a few different ways to keep costs down when it comes to errors and omissions insurance. One way is to raise your deductible. This will lower your premium, but you will have to pay more out of pocket if you do have a claim.

Another way to keep costs down is to purchase a policy with a lower limit. This will also lower your premium, but it will provide less coverage if you do have a claim.

How to get an errors and omissions insurance quote?

Getting an errors and omissions insurance quote is easy when you get a quote online from some insurers.

When getting a quote, you’ll need to provide information about your business, including the type of business, the services, the number of employees, the business location, and the estimated revenue. You may also be asked about your claims history, if any.

Once you have this information ready, you can start shopping for errors and omissions insurance quotes. Be sure to compare policies from different insurers to find the best coverage at the most affordable price.

Worthwhile Errors and omissions insurance companies

There are a few things you should take into account when choosing an E&O insurance company. The most important is the company’s financial stability. Make sure the company you choose is able to pay claims in a timely manner.

Another important factor is the company’s customer service. You want to be sure you can reach someone when you need to and that they will be able to help you with any questions or concerns you have.

Finally, make sure the company offers coverage that meets your needs. You don’t want to pay for coverage you don’t need or be under-insured.

Here are our top picks…

Next Insurance – Next Insurance is one of the leading online providers of E & O insurance for small businesses. They offer coverage for a variety of professionals, including accountants, architects, engineers, and more.

The Hartford – The Hartford is a well-known and respected insurance company that offers E&O insurance for small businesses. They have a variety of options to choose from, so you can get the coverage you need.

Hiscox – Hiscox is a leading provider of E&O insurance for small businesses. Hiscox offers a variety of insurance products, including property and casualty, life, health, and more.

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biBerk – biBerk is an insurance solution designed to cover the unique needs of small businesses. From property damage and liability to product liability and business interruption, biBerk has you covered.

By taking the time to research your options, you can find an E&O insurance company that will give you the coverage you need at a price you can afford.

Conclusion

Errors and omissions insurance, also known as professional liability insurance, is a type of insurance that protects professionals from claims of negligence or mistakes. The policy can provide financial protection in the event that you are sued for damages caused by your work. E&O insurance is important for any business owner who provides services to clients, even if those services are not medical or legal in nature. Review our comprehensive small business insurance reviews to learn more about the best providers and get a quote today.