Monday, May 10, 2010

What is errors and omissions (E&O) coverage?

Probably you have already heard about Errors and Omissions Insurance (E&O Insurance) from your insurance agent. Now you may think whether it's useful to your business or not. No matter how big or small your company is, whether it's a small home business or a large production facility you own, not having any insurance is a risk that you just can't afford. Moreover, if you produce products or services, your business is automatically exposed to Errors and Omissions. Even if you already have Commercial Liability Insurance policy you still aren't fully protected against liability due to personal negligence. General liability simply doesn't pay for errors and omissions you or your workers make when producing goods or delivering services.

Why should you buy E&O Insurance?

Errors and Omissions Insurance is quite simple to understand if you refer to it as "Malpractice" or "Professional Liability" Insurance. The list of professionals who should purchase E&O Insurance include lawyers, engineers, doctors, accountants and any other enterprises that work with clients, providing either services or products that may become the cause of liability if there is a professional error. As you may understand there are countless types of businesses that fall into this category, ranging from real estate to advertising agencies, financial consultants to hardware manufacturers, from appraisers to repair shops. Errors and Omissions Insurance is delivered through a separate policy and assures financial protection against any claims that are filed by third parties, who are dissatisfied or injured by your products or services that were the subject of professional negligence. Thus, this type of business insurance will pay for the court fees, attorney fees and any settlements that the court will stipulate you to pay to the third party.

Will E&O Insurance protect your enterprise from financial loss?

Error and Omissions Insurance won't protect you from direct financial loss due to bad sales or drop in income. However, taking into account the high costs of lawsuits and attorney fees, even if the case is absurd and you aren't guilty at all, the process itself could be a heavy financial burden for your business, making up to tens of thousands of dollars you have to pay after everything is settled down. And this amount of money could be vital for most small and medium sized businesses. In that sense, Error and Omissions insurance is a great form of business insurance that protects your most important assets and your enterprise as a whole against the financial impact of a lawsuit.

It's impossible to not make any mistakes while doing business and every smart business owner knows that very well. That's why you need Errors and Omissions Insurance to deal with respectful claims from your clients. It's always better to pay for business insurance, even if you think that the rates are high, rather than have to pay the court costs that may require you to sell your car or your house, and put you out of business for good. There's not sense in saving money on Errors and Omissions coverage, especially if you are exposed to such situations on a regular basis. What you will save today can be multiplied by thousands and be legally requested from you due to your actions or personal negligence of your employees. If you want to run your business for a long time and become prosperous, it's evident that the first option is for you.


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