Anyone can make a mistake, but some people’s mistakes can be more costly than others. This is particularly true for professionals who provide personal services or advice to others. If you fall into this category, do you know if your insurance includes error and omissions insurance? We know, so you don’t have to.
Errors and omissions insurance is a necessity for some professionals which is why an independent insurance agent is a crucial team member to have on your side. They’re experts in the business insurance field and can make sure you're protected against these risks long before they happen. But first, let’s talk about what’s included in your insurance policy.
Does My Business Insurance Include Errors and Omissions (E&O) insurance?
No, your general business insurance will not include error and omissions insurance. Seeing as not everyone needs this type of coverage, it results in it being an additional policy that you need to purchase if you need it.
You know you need E&O insurance if you’re in an industry where the work or advice you provide to clients can claim things like negligence, misrepresentation, and inaccurate advice, among others.
The good news is that E&O insurance, which is also known as professional liability insurance, is crafted to the profession it’s covering. Some of the most common options include medical, legal, accounting, insurances, engineering, and even miscellaneous for businesses such as hair dresses, dog groomers, photographers, etc.
What Does Errors and Omissions Insurance Cover?
If a professional or business commits a wrongful act such as negligence, provides inaccurate advice or misinformation, error and omissions insurance will cover any fees that the business or professional is legally obligated to pay as a result of the error.
Most commonly this includes:
- Legal expenses generated by a court case, including
- Attorney fees
- Court costs
- Administrative costs
- Monetary settlements and judgments
What is NOT Covered by Errors and Omissions Insurance?
While E&O insurance will protect you in a variety of situations, it may not provide coverage for things like punitive damages, exemplary damages, or any type of damage associated with certain federal laws.
It also won’t pay for things like:
- Fines accrued by the professional
- Intentional acts of wrongdoing
- General liability claims (that’s what your general liability insurance is for)
- Employee claims that would fall under workers’ compensation
- If the state or federal government is involved in criminal charges
- If the negligence is covered somewhere else with another insurance policy
Do I Need Errors and Omissions Insurance?
If you’re in the business of giving advice or providing a service to clients then you should consider E&O insurance. Consider how much a “mistake” could cost you (hint: it’s however much someone could sue you for) and determine whether it’s a risk you’re willing to take.
Of course, some professionals should consider E&O insurance more than others, such as:
- Medical professionals: If a surgeon is having an off day and accidentally sews up a patient with a medical rag still inside them, the patient can sue the doctor for negligence.
- Lawyers and legal professionals: If a lawyer misrepresents someone or simply makes a mistake the client could end up in prison or wrongfully accused of a crime.
- Engineers and architects: If a building or bridge collapses it could cause massive damage.
These are just a few of the high-risk industries but a hair salon or photographer could get sued just as easily for a mistake or negligent act. It’s best to work with your independent insurance agent to determine if you need to add E&O coverage to your business policy or not.
How Much Does Errors and Omissions Insurance Cost?
E&O insurance can cost anywhere from a couple thousand to hundreds of thousands of dollars. What it costs is mainly based on the revenue of the agency or individual who wants coverage. Other factors can include location, materials used, and other inherent risks.
Is Errors and Omissions Insurance Tax-deductible?
Yes, typically error and omissions insurance is tax-deductible because it is considered an ordinary or necessary expense to your business. In cases where professionals needs E&O insurance, it falls into the necessary category and therefore your premium can be deducted from your taxes.
What About Other Professional Liability Insurances? Are Those Included in My Business Insurance?
Professional liability insurance is never automatically included in your business insurance policy. Since there are specific professional liability options for nearly every profession, you need to work with your independent agent to pick the option that fits your business and add it to your policy.
The most common professional liability options include:
- Doctor liability
- Lawyer liability
- Nursing liability
- Anesthesiologist liability
- Optometric liability
- Architects Insurance
- Computer Programmer & IT Consultant Insurance
- Counselors Insurance
- Engineering Insurance
- Malpractice Insurance
- Medical Malpractice Insurance
- Notary Insurance
- Paramedics Insurance
- Personal Trainer Insurance
- Police Officer Liability Insurance
- Private Investigator Insurance
- Security Guard Insurance
- Teacher Insurance
Make sure not to confuse professional liability with general liability insurance which is your most basic form of business insurance. Your general liability insurance policy will cover any third-party claims made against your or business related to an injury related to your business or products.
What Other Add-Ons Should I Consider for My Business Policy?
Shopping business insurance is like sending a kid into a candy store, there really is something for every situation.
Some of the most common add-ons you should consider include:
- Workers’ compensation: this provides protection if an employee is injured or falls ill while on the job. It’s also required in most states
- Commercial auto insurance: coverage for any vehicles that you will be using for work
- Commercial property insurance: protection for your building, inventory, equipment and the like
- Cyber liability insurance: coverage in case someone steals all of your customer data and financial information
- Flood insurance: protection against Mother Nature that’s not included in any other part of your insurance
- Anything from the list in this article: https://www.trustedchoice.com/business-insurance-types/
Here’s How an Independent Insurance Agent Can Help
You’ll hopefully never encounter an incident that's a result of a personal professional error, but independent insurance agents can certainly help protect you from your own mistakes. Independent insurance agents search through multiple carriers to find providers who specialize in business and all other forms of insurance, deliver quotes from a number of different sources, and help you walk through them all to find the best blend of coverage and cost.
TrustedChoice.com Article | Reviewed by Paul Martin
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