we all make mistakes. And if you’re a small business that provides a service to a customer for a fee, one mistake can be very costly.
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It could be an accountant or a consulting firm giving bad advice and preparing for a lawsuit. or a hair salon or printing company that fails to deliver on behalf of their client could face legal consequences. Even if the claim is without merit, legal fees can be costly and put your company’s finances at risk.
That’s where you may need errors and omissions insurance. The best small business insurance companies offer valuable types of coverage to help you recover from professional mistakes.
what is errors and omissions insurance?
Errors and Omissions (E&O) insurance is a form of liability insurance that covers your business against claims for errors in professional services, such as services that are late, never delivered, or inaccurate. e&o is also known as professional liability insurance.
here are some examples of e&o claims:
- A real estate agent does not reveal key information about a house.
- a public relations company’s strategy generates a negative reaction.
- a marketing consultant gives advice that results in lost revenue.
- a tax preparer makes a mistake that results in a penalty.
- a contractor fails to complete a project on time.
- violation of good faith and fair dealing
- false or inaccurate advice
- advertising agencies
- graphic designers
- interior decorators
- management and business consultants
- tax preparers
- technology professionals
- travel agents
- The average cost of errors and omissions insurance is $65 per month.
- About half of small business owners pay between $500 and $1,000 a year for their e&o policies.
- nearly 20% of small business owners pay less than $500 a year for e&o coverage.
what does errors and omissions insurance cover?
Mistakes happen with all kinds of businesses. In addition to actual errors and omissions on the job, here are some mistakes that could lead a client to sue your company.
If your business is affected by an errors and omissions claim, you could face legal defense costs, including court costs and attorneys’ fees, and pay any court settlement or judgment.
Depending on the claim, you could face disciplinary hearings from a licensing or regulatory board. While defending against an errors and omissions lawsuit, you could also incur lost earnings from the time you spend in court and on depositions. errors and omissions insurance helps pay for all these costs.
what does errors and omissions insurance exclude?
employment practices, including wrongful termination or harassment, are not covered by errors and omissions insurance. You will need an employment practices liability insurance policy to help with these costs.
patents and trade secrets that you have taken without permission are also not covered by e&o if you are sued. A general liability policy may offer some protection if you have stolen intellectual property.
bodily injury or property damage caused by your business would not be covered by an errors and omissions policy. for these claims, you would need a commercial liability insurance policy.
work-related illnesses and injuries are covered by workers’ compensation insurance.
Personally Identifiable Information that is lost or stolen by your company is not part of the errors and omissions coverage. a data breach insurance policy would help cover these costs.
who needs errors and omissions insurance?
You will need to purchase errors and omissions insurance in certain states and where licensing boards require it. for example, more than 10 states require real estate agents to show proof of errors and omissions coverage before receiving their real estate licenses.
In addition to real estate agents, here’s a rundown of the types of businesses that can benefit from professional liability insurance.
How much does errors and omissions insurance cost?
here are details on e&o insurance costs, according to insureon.
average cost of e&o insurance by profession
the risk associated with your industry will affect your cost of e&o. Here’s a look at how average annual costs vary among common professions.