When you understand the errors & omissions insurance basics it can help you protect your company in the event of losses associated with a customer lawsuit. Due to a considerable increase in customer lawsuits, many business owners have chosen to safeguard their assets with E&O insurance.

Typically, errors and omissions insurance is used by professionals and business owners who offer design solutions, provide professional advice, make educated suggestions or provide solutions to a range of customer needs. Examples of professionals who may benefit from errors and omissions insurance include real estate agents, notaries, teachers, inspectors and designers. Because this is not an exhaustive list, it’s a good idea to consider the following tips to help you learn the errors & omissions insurance basics.

1. Research how errors and omissions insurance works.

2. Evaluate the benefits of errors and omissions insurance coverage.

3. Learn how to obtain errors and omissions insurance quotes.

Action Steps
The best contacts and resources to help you get it done

Assess the benefits of business errors and omissions insurance

Regardless of the products and services you provide, customers can claim that you committed a business error that cost them money or caused them harm. The costs to defend such claims can be considerably high. Errors & omissions insurance policies will cover many of the court costs associated with defending this claim. The insurance will also cover any final judgments you are required to pay in the event you lose the case.

I recommend: Read more about errors and omissions insurance by visiting InsurePro, a division of Gaston & Associates. You can also read the Insurance Journal by Wells Publishing to learn about E&O insurance policies.

Learn more about the basic coverage offered by E&O insurance

The annual limit and claim limit of business errors and omissions insurance policies is typically based on the policyholder's exposure to liability. The claim limit of E&O insurance indicates the maximum amount that will be paid for any single occurrence and the annual amount is the maximum yearly payout. Generally, commercial errors and omissions insurance coverage limits will start at $250,000/$500,000, but you can set them as high as $2 million/$4 million.

I recommend: Read more about professional liability insurance by visiting Northbay Auto Insurance Center. You can also learn more by visiting Business Insurance Now.

Find errors and omissions insurance providers

You can obtain an errors and omissions insurance quote online. The cost of similar E&O insurance policies will vary among providers. To find a trusted and reliable E&O insurance provider, try contacting highly rated providers by searching A.M. Best and Standard and Poor's. You can also visit individual providers to see what type of products are available.

I recommend: Check out errors and omissions insurance products provided by The Chubb Group. You can also obtain information about business liability insurance by visiting Moonstone Interactive.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Purchasing errors and omissions insurance is a critical factor in managing your business risk. However, there are other strategies you can use to further decrease your exposure to lawsuits. These strategies include providing customers with a complaint line to allow them to directly and immediately communicate their frustrations with your service. Sometimes, this simple step can reduce the likelihood of a lawsuit while increasing your customer's satisfaction with how you conduct business.

Errors and omissions insurance coverage is a must for any business that offers consulting, services or advice to buyers. This includes real estate agents, travel professionals, architects and accountants, just to name a few professions covered by business errors and omissions insurance. Simply put: E&O insurance covers the cost of defending a client lawsuit and the resulting judgment, if any.

Commercial errors and omissions insurance recognizes that everyone makes an occasional mistake. Sometimes, a situation that harms a client is out of your company's control, such as a misdirected package or a delayed shipment.

Client lawsuits and judgments can bankrupt a small business. Errors and omissions business insurance protects you against that eventuality.

When you structure your business liability insurance coverage be sure to include an errors and omissions insurance policy to cover you for:

1. A client lawsuit, claiming errors and omissions by your company, resulting in a loss to them.
2. A service that was delayed and caused a client financial damages.
3. Any business mistake or misunderstanding that results in a loss to the client.
   
   

Action Steps
The best contacts and resources to help you get it done

Find a good business liability insurance agent

Errors and omissions insurance coverage is sold through commercial insurance companies and independent agents that specialize in such coverage. It's wise to get errors and omissions insurance quotes from a few agents or companies specializing in E&O and choose one whom you are comfortable working with.

I recommend: The Association of Online Insurance Agents (AOIA) will help you find an agent in your area to handle your business E&O needs. Check out InsuranceMatch to get E&O insurance quotes for your business type from multiple errors and omissions insurance carriers.

Decide on the right E&O insurance coverage

Errors and omissions coverage varies to suit a wide range of industries. Coverage and premiums depend on the type of business, the risk exposure, your business location, the number of employees and many other factors. A good business insurance agent or insurance company can help you make sense of all of your options.

I recommend: Axis Insurance Services provides business E&O insurance for a number of industries and businesses including real estate, mortgage brokers, lawyers, architects, insurance agents, medical groups and Preferred Provider Organizations (PPOs). Wired for Growth can advise and provide you with an insurance quote for those in the technology, software, Internet or pharmaceutical business. Chubb Insurance also offers Errors & Omissions insurance for IT companies. Contact a technology agent for more details on the options available for your company.

Avoid professional liability insurance claims with good business practices

Good business practices, such as putting all client contracts and communications in writing and structuring a business plan that identifies and incorporates specific business exposures, will help ensure that your business has few, if any, errors and omissions claims. In addition to keeping your clients happy, having few claims gets you a lower errors and omissions insurance quote.

I recommend: Aon Insurance Services specializes in providing legal counsel that includes pre- and post-inception services like professional liability policy wording and claim analysis, counsel and avoidance. They will also assist you in obtaining defense and indemnity coverage when needed.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Remember to review your business errors and omissions insurance policy requirements periodically. Your coverage will need to be updated as your business and assets grow.
• •  As your business grows, consider hiring a corporate attorney to assist you in developing good business practices to guard against product or service liability issues and offer sound advice for errors and omissions claims.

Errors and omissions insurance goes beyond your general liability coverage to protect your company from claims of error or the failure to perform work as promised in your contract. Your coverage generally includes your legal defense costs, and your errors and omissions business insurance pays for any resulting judgments against you, which includes your court costs, up to the coverage limits on your policy.

Business errors and omissions insurance is especially critical to a large number of businesses and industries. Finding the right carrier or speaking to your existing insurance provider will help you weigh your coverage options.

To help you with the errors & omissions insurance basics:

1. Start with E&O insurance definition info as well as who is eligible for coverage.

2. Check out errors and omissions insurance providers in your specific industry (e.g. realty).

3. Examine business liability insurance / E&O frequently asked questions.

Action Steps
The best contacts and resources to help you get it done

Begin with errors and omissions insurance definitions

Start with general information like an errors and omissions insurance definition as well as what industries are impacted by the need for E&O. You'll be surprised at how many industries are influenced by errors and omissions insurance.

I recommend: American Insurance Professionals gives the best explanation of what commercial errors and omissions insurance is and who needs it. Check out the list from InsurePro of eligible companies for E&O insurance. Insurancefortechs.com offers a simple, easy to read description of E&O insurance definition.

Check out E&O insurance in your field

Move on to looking at the need for commercial errors and omissions insurance in your particular industry. Each field will have specific coverage differences for commercial errors and omissions insurance, and providers will have difference considerations to look at when meeting and quoting you.

I recommend: See how errors and omissions insurance coverage applies to realtors through information from National Association of Realtors. The Organization of Real Estate Professionals address errors and omissions insurance coverage programs to appraisers, home inspectors, agents/brokers as well as those in the mortgage fields.

Review E&O insurance FAQs

Look through errors and omissions insurance frequently asked questions. Chances are your questions or concerns will probably be addressed in the documentation provided by one of the possible carriers.

I recommend: Check out the frequently asked questions on E&O addressed by Axis Insurance Services. Pearl Insurance also addresses the frequently asked questions about business errors and omissions insurance, particularly in the real estate field.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  If you are considering E&O insurance and you already have an existing insurance carrier, seek out quotes from other insurance providers. Before you jump ship with your current provider, though, take those quotes back to your agent, and see what sort of pricing he or she can do. They want your business, and can at least try and be competitive and will quote you out as fairly as possible.

Errors and Omissions insurance, usually called E&O insurance, covers parties involved in a service-type business in the event they are sued for errors, omissions or failure to perform services as expected. In the medical field, it's called malpractice insurance, and lawyers call it professional liability. However, E&O insurance offers more coverage than just a general liability policy. The following terms should help you understand what E&O insurance is and the common terminology used in these policies.

Action Steps
The best contacts and resources to help you get it done

Claim limit and annual amount

The claim limit of E&O insurance refers to the maximum amount the insurance company will pay on a claim for a single occurrence. The annual amount is the maximum amount the insurance company will pay out in a single year for all claims.

I recommend: Find Insurance offers an insurance-finding website that includes details on errors and omissions insurance.

Claims-made policy

A claims-made E&O insurance policy refers to coverage that becomes active when a claim is both made and reported to the insurance company in one policy term or period. The coverage amount is as high as the amount you have left at the time the claim is made.

I recommend: See more information on claims-made policies on the American Insurance Professionals.

Professional liability

E&O insurance also encompasses professional liability insurance and malpractice insurance. These policies cover negligence in performing professional duties or the failure to perform professional duties. However, policies do not cover illegal acts.

I recommend: The Insurance Information Institute provides information on E&O insurance policies and what they cover.

Tail coverage or extended reporting period

This is an extension policy on an policy that has been canceled. The tail coverage or extended reporting period covers claims made after the policy ends.

I recommend: The Errors & Omissions Insurance Resource Center answers some basic questions regarding E&O insurance.

Defense costs and damage awards

Defense costs and damage awards are what E&O insurance policies typically cover. No matter what the claim, the policy will pay these. The defense costs of even a nuisance claim can be thousands of dollars, and an E&O policy is set up to cover these.

I recommend: Axis Insurance Services offers an explanation of defense costs and damage awards in E&O insurance policies.

Occurrence policies

These policies offer coverage when an event or occurrence triggers it. The event must occur, but not necessarily be reported or filed, during the policy term or period. No matter when a claim is made, the policy will cover the event that occurred during the insured period.

I recommend: The World Chiropractic Alliance has an article that explains the difference between claims-made and occurrence policies.