Errors and Omissions insurance is an insurance policy that is required by anyone who offers professional services. Whether you are an individual or a business organization, errors and omissions insurance can protect your business. Falling under the category of professional liability insurance, this policy is needed by people and businesses that offer advice. Services such as healthcare and legal advice, engineering and consulting, and even electricians and architects may need errors and omissions insurance.
What is Errors and Omissions insurance?
Errors and omissions insurance policy covers scenarios that deal with misrepresentation, negligence, malpractice, and more. It’s needed by professionals who offer services or advice, as they run the risk of being sued by their clients.
Should a client find that they’ve experienced any loss, usually financial, as a result of the actions of the service professional, they can sue. When this happens, the business can become involved in a legal battle. Many times, these legal battles continue for months, leading to huge legal fees. With errors and omissions insurance, businesses won’t have to pay for their legal fees or their settlement by themselves.
The insurance policy will cover the amount required for the legal proceedings, and even settlement claims, up to the amount stipulated in the policy.
Who needs Errors and Omissions insurance?
Errors and omissions insurance is necessary for anyone that stands the risk of being sued by their client as a result of their work performance. Sometimes, even as a result of an accident, a business may not be able to deliver on its end.
Take, for example, a business consultant who was hired to improve business processes for a client. The consultant did their job and gave their advice. However, the advice didn’t work out for the client, and they now want to sue for damages. Sometimes, a client may even require that a business has errors and omissions insurance in place before signing a contract with them. This is as the insurance policy makes it easier for them to recuperate losses, if any.
Similarly, an engineering firm that gets hired and winds up making a costly mistake could get sued. This mistake can come in the form of selecting incorrect raw materials that affect the project later, delayed deliveries of raw material, or even an error in design. If the customer engineering firm wants to ensure protection against a potentially lengthy lawsuit, then errors and omissions insurance can come to the rescue.
Are businesses legally required to get Errors and Omissions insurance?
Businesses are not legally required to have errors and omissions insurance in most states, but it is recommended. Certain professions, however, do require errors and omissions insurance. Doctors, for example, need to have this insurance in place. This is to protect themselves should they get sued for malpractice. Lawyers are also required to have this insurance policy in some states.
Consider checking through the state, local, as well as national guidelines and regulations to be followed in your state. This will help ensure that you have met all the requirements needed to work in your profession, within your state.
Errors and omissions insurance for doctors usually goes by another name, medical malpractice insurance. Another common name for errors and omissions insurance is professional liability insurance.
Why is Errors and Omissions insurance needed?
Errors and omissions insurance helps businesses protect their finances and their interests. There are various circumstances due to which a client can sue a service provider. Undelivered projects leading to financial losses or even accidentally messing up a report can have serious consequences for the client. An employee can make one mistake, such as entering the wrong number into required fields, setting the foundation for eventual disaster.
Businesses can’t completely avoid the possibility of error. Keeping this in mind, errors and omissions insurance allows businesses to protect their reputation, as well as their finances through the legal battle.
Businesses that don’t have errors and omissions insurance in place will have to consider paying for the legal proceedings themselves. This payment can be ongoing, especially as cases can sometimes drag on. When this happens, the business will be consistently losing money through paying lawyers, attending legal proceedings, and having to take time off work to be at Court. When the length of the case drags on, businesses can find themselves being forced to spend time attending to their lawsuit. In this way, a lawsuit can lead to a business needing to close down its business for good.
However, businesses with errors and omissions insurance in place don’t have to worry about this. This is as they will receive financial coverage for a large part of their legal battle. Very often, this also helps businesses save their reputation as well. With this, businesses can focus on growth and scalability, while the insurance carrier helps deal with any pending lawsuit.
For professional service providers, their reputation is important to their success. An extended lawsuit could negatively affect business reputation. To ensure that business can continue unaffected, any lawsuits should be settled both swiftly and amicably. Errors and omissions insurance allows you to do that.
What happens when you have Errors and Omissions insurance?
With this insurance policy in place, businesses can react swiftly to any legal battles. As soon as you learn of the lawsuit, get in touch with your insurance carrier. Your carrier can then initiate proceedings related to the insurance policy.
When that is done, you will receive both financial help and support from your insurance team. This is done to ensure that the case is resolved as soon as possible, and also so that your business sustains past the case.
Should you consider getting Errors and Omissions insurance?
Errors and omissions insurance can be necessary for many professional service providers. You should check with your state and local official bodies to ensure that you don’t need this insurance policy within your state. Errors and omissions insurance is a popular choice among business owners as it protects the interests of both the business and the client.
If the client experienced financial loss as a result of the business, then they will be less inclined to work with the business again. They will also want to recuperate their losses. With errors and omissions insurance in place, they can do this without negatively affecting the business.
At the end of the day, the business can absolve themselves of their error, and clients can recover lost money with this insurance policy.
Errors and omissions insurance is necessary for many professional service providers. This is as it enables them to protect their businesses against lawsuits. Without this insurance policy, businesses would have to pay themselves.
There are other insurance policies that can help businesses succeed as well. From general liability data breach, insurance policies provide protection against most business risks. While errors and omissions insurance is one such insurance policy, you may find others that fit your needs as well. Find out more about business insurance and how it can help you protect your business.
If you want to learn more about insurance policies for businesses, then visit the BizInsure website.