Errors & Omissions Insurance, or E&O insurance for short, is a kind of insurance that protects you or your small business from the likelihood that a customer will hold you responsible for a service that you have provided—or failed to have provided, for that matter—that did not end in the promised or expected outcome.
This is the insurance that will protect you from omissions or errors that the client feels you have committed. E&O insurance covers the cost of defending your business or yourself from a negligence claim by a customer along with the damages awarded in such cases or settlements.
This is not a new type of insurance, as a matter of fact it is just another form of liability insurance and is also referred to as professional indemnity insurance (PII) and Professional liability insurance (PLI). For professionals like engineers, architects, accountants, lawyers, and others this is called a professional liability. For chiropractors, dentists, and doctors to name a few, this is known as malpractice insurance. Whatever you call E&O insurance, it all boils down to coverage that is focused on the alleged omission or error, financial loss caused by, or failure to perform on the part of the product or service sold by the policyholder—like you.
Who Needs to Buy E&O Insurance?
Anyone who is in the business of providing services or goods for a fee has E&O exposure. Doctors, lawyers, wedding planners, accountants and even insurance agents need the protection of Errors and Omissions insurance.
If you are in the business of selling goods and services, there’s an advantage to be gained with E&O insurance. Why? Simply because errors are part of being human, regardless of who is at fault. Defending a lawsuit can cost thousands of dollars even if the allegations are groundless. These costs alone can bankrupt an individual, including their small business.
Traditional liability insurance policies typically only cover claims concerning personal injury, property damage, and bodily injury. On the other hand, an E&O insurance policy covers you and your small business against common claims like inaccurate advice, violation of fair dealing and good faith, misrepresentation, and even negligence.
Where to Find E&O insurance
Once the only option for professional liability insurance was large insurance companies like Nationwide and Geico. Over time, smaller providers such as UFG Insurance became an option but they still required small business owners to contact an agent in order to get a quote.
More recently, online companies like Instant E&O and Get Insured 24/7 sell Errors & Omissions insurance policies that can purchased totally online via their ecommerce sites. Buyers can bind online as opposed to waiting through a longer offline process.
Factors to Consider when Getting E&O Insurance Coverage
E&O insurance policies do not have a standard coverage so you need to read it carefully. Make sure that the offered coverage fits your E&O exposure. You have to understand that an E&O policy meant for a computer programmer would not be a good fit for an attorney or a doctor; therefore there is no one-size that fits all E&O policy.
Check the coverage period for your policy. Some policies cover claims made and reported during the policy period. Other E&O policies do not honor claims based on acts committed prior to the policy period. Make sure you understand whether you’re covered if a claim was made and reported during the covered policy period but the act occurred before your coverage period.