Protect Your California Business With Errors and Omissions Insurance
If you own a business, you may already have a general liability insurance policy, and you may feel like it’s enough to prevent a lawsuit from ruining what you’ve worked so hard for. However, there are several things that a general liability policy coverage doesn’t include, which could be problematic, especially for a state like California, where residents are used to top of the class services. Fortunately, a type of professional liability insurance called errors and omissions insurance can provide adequate coverage for you for the mistakes you’ve made or omissions that your client believes you did.
Errors and omissions insurance help you if a dissatisfied client sues your business over a work mistake, providing the coverage you need for legal expenses and other costs like settlement or judgment.
To help you understand more about the life-saving errors and omissions insurance here’s everything you need to know about it, saving your brand and company.
What Is Error and Omissions Insurance?
Errors and omissions (E&O) insurance is a branch of professional liability insurance that protects companies, employees, and other professionals against claims of insufficient work or negligence. The omissions and errors insurance policy cover your business or you when a client files a lawsuit against you and holds you responsible for the services you provided didn’t give the expected or promised results.
For those in the medical field, including physicians, dentists, and chiropractors, the E&O policy is called malpractice insurance. Meanwhile, for lawyers, architects, and engineers, it’s called professional liability. However, whatever the name is, the bottom line is that it covers you for errors from your services or omissions that your client perceives you made.
Most E&O insurance policies cover expenses for judgment, defense, or court costs and settlements up to the amount you’ve agreed to in your insurance contract. Even if a client’s allegations are groundless, you still have to pay over thousands of dollars to defend yourself against the claim. That’s why many smaller businesses or entrepreneurs in California become bankrupt, with larger companies experiencing lasting effects on their bottom line.
It’s a type of liability insurance that every professional advice-giving individual or business that provides services should have.
What Does Errors and Omission Insurance Cover?
E&O insurance helps protect your business against client claims of:
- Work Mistakes
Even the smallest services or professional error could end up costing clients a lot of money. When your client tries to recoup their loss by filing a lawsuit against your company, an E&O policy provides enough coverage for your legal costs, saving your business.
- Undelivered Services
If your company doesn’t finish a project or task, it may hinder your clients’ business plans. When your team fails to deliver promised services, a client can sue you, mainly if it adversely affected their financial bottom line. E&O coverage also covers these fees when this scenario happens.
If your company doesn’t reach the minimum industry standard while you’re working with clients, they may sue your business for negligence. However, if the client doesn’t like your services or is dissatisfied with the results, they can still sue your company even if there’s nothing wrong with your work. An omission and error insurance policy helps you cover the fees for legal cases like this one.
- Unmet Deadlines
If your business misses a deadline on a task, project, or general services, it may delay your client’s plans and lead to a decrease in revenue. If they sue your company over this, the E&O insurance policy can cover the costs of the lawsuits.
E&O coverage typically includes defense attorney fees, court costs, administrative costs, settlements, and judgments resulting from the mentioned scenarios above. Errors and omissions insurance can be costly, ranging from a couple of thousands to millions of dollars.
Without the errors and omissions insurance coverage, you’re at risk of paying these expensive fees out of pocket, which can result in your business going bankrupt.
Who Needs Errors and Omissions Insurance?
Companies or individuals that need to have E&O insurance include:
- Law firms
- Financial institutions
- Software development companies
- Cultural organizations
- Healthcare facilities
- Advertising firms
- Educational institutes
- Pet services
If you’re running a business that provides service to clients for a fee, you have a high risk of facing lawsuits, that’s why having E&O insurance is crucial if you’re in the mentioned niche above. Coverage for a standard liability policy is often not enough to cover legal fees for lawsuits made against service-providing and advice-giving companies.
Errors and Omissions Insurance Costs in California
Like with other insurance, errors and omissions will cost a different amount for every buyer. However, in California, the policy’s average costs range from $500 to $1000 per worker yearly, meaning if you have 50 employees, you can estimate your policy coverage premium to be between $25,000 and $50,000 annually. But it will still depend on the insurance services you choose.
To give you a better idea, here are several factors that affect the errors and emissions policy:
- Business Risk – If your business in a higher risk industry, like healthcare or finances, you’ll likely pay more.
- Coverage Limits – The higher you set your policy limits, the higher premiums you have.
- Company Claims History – Whether you’ve faced a copyright ‘all rights reserved’ claim or other liabilities, the higher the claims made against your brand, the more you have to pay.
- Location – Rates also vary depending on where your establishment is. For example, if your company resides in an urban area, you’ll have higher insurance premium costs.
However, no matter the price, you should always consider a professional liability policy for your business to protect your hard work.
Why You Need Errors and Omissions Insurance
If you’re running a business, you need errors and omissions insurance because the cost of claims your client can make against you can be expensive, putting your business at risk of closing. Even if your client drops the lawsuit, your legal fees can still result in thousands of dollars. It’s expensive running a business, that’s why it’s essential to get the errors and omissions policy for the best protection.
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