Errors and omissions insurance is a coverage that can be purchased separately or added to a commercial general liability insurance policy. This type of insurance is typically purchased to protect a business or individual from claims that are made for services that were not provided and mistakes or errors that were made. The most common types of errors and omissions policies that are sold are professional liability and malpractice insurance policies.
- The purpose of errors and liability insurance is to protect a business or individual when financial harm is caused to a client because of a mistake or error. Errors and omissions insurance policies will pay for defense costs, settlements and court judgments. This type of coverage can protect small businesses and large businesses from frivolous lawsuits that can cost many thousands of dollars to defend. Without errors and omissions coverage, a small business could go bankrupt if it is sued.
- Errors and omissions insurance is needed by professionals or anyone who provides services to a client or customer for a fee. This can include professionals such as doctors, lawyers, accountants, dentists and others. Coverage is also needed for less thought of businesses such as an advertising company, a wedding planner and publishers. Consultants, such as computer, marketing and heath care consultants, will need errors and omissions insurance.
- Companies and individuals can get various amounts of coverage for errors and omissions insurance policies depending on what is needed or required. Most professional liability and malpractice policies for errors and omissions coverage are issued in increments of $1,000,000. The deductible for a policy can range from $1,000 up to $25,000 depending on the amount of out-of-pocket costs a business or individual is willing to incur.
- Most errors and omissions insurance policies that are issued have a claims-made provision. This means that a policy will only cover work or services that were provided during the policy term. A policy will also only provide coverage for claims that were made during the policy term. However, an endorsement for an extending reporting period can be added to a policy. This endorsement will extend the coverage for claims that are made after the end of the policy term.
- The best time to purchase errors and omissions insurance is before the chance or risk can occur. This means obtaining policy coverage before a business or individual starts providing a service to a client or customer. Many businesses or organizations may require errors and omissions coverage to already be in place before contracting for service.
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