17 Oct E&O Insurance: Shielding Your Small Business from Costly Mistakes
If you own a small business, then you need to have every possible type of insurance protection in place. This includes errors and omissions insurance if your business involves providing certain types of services. Called E&O for short, errors and omissions policies can prevent you from having to pay for legal fees, fines, and other things out of pocket should something go wrong with the services that you provided for a client.
How does errors and omissions insurance work? And exactly who needs to have it? The answers to both of those questions are below.
What Exactly Is E&O Insurance?
Mistakes happen. After all, no one is perfect. Even if you’ve been running your own accounting, insurance, or real estate business for years, you could still make a mistake on something that a client found important. As a result, you may find yourself in court, having to decide on a monetary settlement that satisfies the judgement.
This is what errors and omissions insurance is for. It’s designed to protect people who own businesses in specific industries, kicking in when something goes wrong. Essentially, E&O insurance is a very specific type of liability insurance, designed to help you from having to pay large financial settlements out of pocket when a mistake is made.
Who Needs E&O Insurance?
Depending on where you’re located, you may have to have state or county mandates errors and omission insurance. However, even if this isn’t the case, it’s a clever idea to have this type of insurance if your small business fits into one of these industries:
- Accounting, tax preparation, and other form of financial services
- Insurance of any kind
- Realtors and real estate brokerages
- Nonprofits and charities
- Wedding and event planners
- Printing companies
- General maintenance or contracting businesses
- Engineering and architecture firms
These are just a few examples of the many small businesses that can benefit from having E&O insurance policies.
What Does E&O Insurance Cover?
Obviously, errors and omissions insurance lives up to its name, covering mistakes due to accidentally leaving out crucial information of any kind on a client’s documents. It also covers things like breaches of contract or missing important deadlines, as well as being unable to provide a certain service at a specific time. Other things that errors and omissions insurance can cover include professional negligence of any kind, and not meeting professional standards of care. If you accidentally do any of these things and end up materially hurting a client, they have the right to sue you, at which point your E&O insurance will kick in to help you pay for attorney fees and settlement amounts.
What Doesn’t Errors and Omissions Insurance Cover?
In general, errors and omissions insurance doesn’t cover anything that isn’t the result of an honest error, omission, or mistake. Things like knowingly conducting illegal or criminal acts, dealing with the aftermath of cybercrime, or paying for physical injuries, the latter of which falls under general liabilities policies, not professional liability ones, would not be covered.
Ready to learn more about E&O insurance for your business? Our knowledgeable team at Spivey Insurance can help review your current coverage or help you set up a new policy. Contact us today.