Cooper Business School

Errors and omissions insurance is vital for various businesses and business professionals. E&O protects the insured from losses associated with a lawsuit from an unhappy client; it protects individuals from losing everything they have if litigation results in personal judgments against them.

What exactly is E&O insurance? It’s essentially a kind of malpractice insurance. Lawyers, accountants, physicians, and other service professionals carry E&O insurance. Businesses need to do so as well. Decisions made by companies can go wrong and frequently do go wrong. E&O insurance protects against different kinds of risk, from omitting to do something that should have been done to making serious errors with severe consequences.

What kinds of businesses should have E&O insurance? A good example will be insurance companies.Let’s say a client makes a claim against the insurance company, based upon what the client claims is a faulty evaluation of commercial property. That property burns, and the client finds that there is insufficient coverage to rebuild and says that the insurance company erred in its underwriting. That is exactly the kind of situation in which errors and omissions insurance is necessary.

A manufacturing business is another good example. It may be called something different in insurance parlance, but the insurance is the same: it protects against errors and omissions that the company makes in the course of its business.

This is insurance against imperfection. People can and do make mistakes; they take risks that, in hindsight, were the wrong ones. They fail to act in a certain way when they should have done so. This kind of insurance helps protect companies and individuals from the consequences of those errors and/or omissions. You still worry about taking the wrong step or making a serious mistake, but you can stop worrying about the consequences in case it comes to litigation. Even groundless lawsuits bankrupted many professionals, who had to pay high attorney fees to protect their reputation that is why getting adequate coverage from a reputable insurer is essential.

Obtaining an E&O insurance policy has been made easy with many insurance websites offering a free instant online quote. Rates will vary depending upon the amount and kind of insurance needed, the amount of the deductible, and the nature of the particular business. While it may seem like a lot of money, it isn’t, not when weighing the benefit of the insurance against the possibility of claims and litigation that can force a company out of business. Insurance protects the business against risk – don’t risk being without it.