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How to Get Errors & Omission Insurance for Small Business

If you are business owner or you have a company that offers a professional service, you should have come across the term Error and Omission insurance (E &O). But in case you haven’t heard of it, an Error and Omission insurance is an insurance type that protects business owners against claims by clients or customers for inaccurate work or any other form of negligence in performance of their professional duty.

What is Error and Omission Insurance?

Errors and Omission insurance, also known as liability insurance, is an insurance cover or package that companies and individuals buy or subscribe to, which protects them from claims of negligence or failure to perform duties. The Errors and Omission insurance is less commonly called malpractice insurance, especially when it applies to professionals, such as attorneys and medical doctors. But it is called E AND O (errors and omission) in insurance, consultancy and brokerage companies.

In other words, it protects the insured (company or business owner that takes the insurance policy) against liability for committing an error or omission in performance of his or her professional duties. In this article, I will cover areas like: who can take an Error and Omission cover, advantages of taking such insurance policy, and how to go about getting an Error and Omission insurance cover.

Who Can Get An Error And Omission Insurance Cover?

The Error and Omission insurance is needed by everybody as long as you are offering one type of services or the other, but the following group of professionals need this type of insurance essentially:

  • Business owners
  • Company insurance dealers or brokers
  • Financial planners
  • Investment advisors

If you are offering any of the mentioned services, you need an Error and Omission insurance cover to avoid future liabilities.

Advantages of Getting an Error and Omission (E & O) Insurance Cover

Clients or customers of a company sometimes need to press charges, indicating there has been an act of negligence on the part of the company or an unacceptable omission or error in their products or services.

Should a client file for legal action against a company, the company’s Errors and Omission (E and O) insurance covers the company or staff, protecting them by remitting any costs they may incur from the court cases and fees. It usually covers cost made after judgment or whatever settlement has been decided or the defense cost, which is the cost of hiring an attorney.

  • Saves You Bigger Liabilities in the Future-: No matter how careful you are with your job, there may be a slip or negligent act from you or your employee when least expected; that can put a hole in your company’s finances if you didn’t take the Error and Omission insurance.
  • Protects You from Fraudulent Clients-: There are some clients who are just fraudulent and like to reap where they didn’t sow, they may choose to bring up a negligent lawsuit against your company for just a minor mistake that could have been overlooked. The Error and Omission insurance covers you from this kind of people and situations.

The Error and Omission Covers the Following Aspects

a. Negligence-: One of the major aspects covered by the Error and Omission insurance is the aspect of negligence. Negligence here has to do with careless way of acting or omission to carry out an act stipulated by law that caused your client to suffer from a loss or personal harm.

The client in such a situation has the legal backing of the law to bring a lawsuit against you for your act of negligent. Taking for instance, a Surgeon that forgot a surgical blade in the stomach of his patient can be sued for act of negligence.

b. Defence Cost-: The Error and Omission insurance also covers your defence cost, which is money that will be paid to your Attorney or Lawyer that is defending you for the lawsuit, even if the matter is later striked out of court.

c. Personal Injury-: If your act or negligence to act caused another (your customer) to suffer to his person in the form of slander or libel, this type of insurance covers the liability.

d. Infringement of Copyright-: If your act or negligent to act encroaches another’s copyright, the Error and Omission insurance covers for such infringement.

In a situation where a claim is filed, but is found baseless in court or the company wins the case, the court process could have gulped a lot of money—even though the company won the case. In such case, the E and O insurance still covers all expenses, so it doesn’t come in handy only when a the sued company or individual loses the case or is heavily penalized.

E and O insurance also covers personal injury such as libel or slander accusations against the company or its staff, copyright infringement (in the case of publishing companies), and general claims of damages. Customers could also accuse a company of incorrect advice. This insurance covers it all.

Since the way the claim works is usually according to the policy made by the company or the service provider, it means if the policy still holds then the claims made by the dissatisfied customer carries weight. Even when your company has put up every measure to avoid possible legal action, it is good to still have an E and O policy in place. The consequences of not having this insurance can cripple a large company or cause a small company to fold up.

Recently, a cosmetic surgeon in the united states was sued because he performed a procedure to correct a client’s face, but this went sour. It was agreed by both parties that the client would look exactly like what the surgeon displayed to the client. However, though the surgery was successful, the client was not satisfied because the image on the system was far different from what she now looked like. She filed a lawsuit, and the case was protracted. This cost the surgeon a lot of money and really affected his business. It took a long time before he could fully recover.

If you understand this true-life story, you won’t think twice before getting the liability insurance for your company. Now we have looked into all the aspects that the Error and Omission (E&O) covers and reasons why people need this type of insurance and the set of professionals that need it most, let’s get to the main aspect of how to get the insurance policy.

How to Get an Error & Omission Insurance Policy for Your Business

1. Get the Cover as Soon as You Can

If possible, you should get this insurance policy as you are going through the process of legal registration for your business. But if at all you missed or forgot to get the insurance, then make it a point of assignment to get one as soon as you can to avoid unnecessary liabilities on your company.

2. Contact and Inquire from Your Insurance Company

It is important to mention that not all companies have this type of insurance policy cover; so it is necessary that you contact the insurance company you are already using to ensure that they offer the Error and Omission insurance cover. If they do, fine and better but if they don’t; you can start looking for another insurance company that do, so as to take the cover before it is late.

3. Ensure That You are Covered

If you have the right company to take the cover with, go through every detail of their insurance policy with your lawyer or legal advisor to ensure that all the services offered by your business or company are covered in the policy. You can also look out for innocent party insurance coverage within the Error and Omission insurance cover to cover innocent third parties affected indirect by the companies act.

4. Get the Advantage

All am trying to say here is that, you should get all the advantages you can from the insurance company. For instance, some insurance companies prior to the coverage time selection; cover for liabilities you incurred before you took their insurance policy. The terms of these may be that the company will bear the cost of liabilities incurred six months prior to the time of taking the insurance cover. You can take advantage of this and to ensure that your company is well covered.

How Much Does Errors And Omission Insurance Cost?

Errors and omissions in business could be costly, yet they are almost inevitable. For example, if a parcel company delivers a package to a wrong address that looked very similar to the right address, time would be lost, inconveniences will be created, and there would be losses in terms of cost on the business.

So, no matter the cost of an Errors and Omissions Insurance policy, it will always be worth paying. And the best time to get this insurance package is before the risk is ever taken. The cost of an Errors and Omission insurance policy depends on a number of factors:

  • How many people work for you
  • The specific work your company does or the services you provide
  • The region or area your company operates
  • The extent of operation

Here is a quote on the average price you will pay insurance could cost you as stated by a tech insurance company.

Quote for Small Companies

  1. Insurance for a small company such a consulting company with two full-time staff and 10 programmers that makes $250,000 to $1million in annual revenue:
  • Sample annual premium = $5,000
  • Sample coverage limit per occurrence = $1million
  • Sample coverage limit annual aggregate = $1million
  1. Insurance for independent contractor/web designer who earns around $150,000 in annual revenue:
  • Sample annual premium = $1,000 to $1,500
  • Sample coverage limit per occurrence = $1million
  • Sample coverage limit annual aggregate = $1million

Quote for large companies

  1. Insurance for a large company such as a consulting firm defined as company having 6-10 staffs and 10 to 50 programmers, and earning $3million—$10 million in annual income.
  • Sample annual premium = $14,127
  • Sample deductible = $5,000
  • Sample coverage limit per occurrence = $1million
  • Sample coverage limit annual aggregate = $1million

In conclusion, I have taken you through the subject or Error and Omission insurance cover (E & O), who needs the insurance cover, advantages of taking the insurance cover, aspects the insurance covers and how to go about getting the insurance cover; it now time for you to contact your insurance company to checkout their E & O insurance policy and areas it covers, and if unfortunately your insurance company doesn’t cover this type of insurance, there are many other insurance companies that can provide you with this type of insurance policy.