When operating a small business, most business owners realize they need to protect their company's assets with a general liability insurance policy. But if your business is paid for recommendations, advice, guidance, professional services or manufactured goods, then you may need the additional protection of a professional liability policy, better known as Errors & Omissions insurance.
While a general liability policy basically covers bodily injury, property damage or personal injury, Errors & Omissions provides coverage if your business is liable as a result of a mistake that might cause monetary harm.
Specifically, E & O insurance covers costs associated with defending your business against a customer's negligence claim, including lawyer fees, court and administrative costs, settlements, judgements and defense costs.
The number of claims filed and the dollar value of the claims will affect the cost of maintaining an E & O policy. In general, the more claims filed, the higher the insurance premium. But the cost of a policy is usually a fraction of the cost of a potential claim.
Some claims are not covered by E & O; for example, fraud, illegal activity or intentional acts of negligence. Plus, policies only cover economic loses. Physical harm and property damage would fall under the general liability policy.
In addition to your business, Errors and Omissions insurance can be purchased to cover employees. It is also available for those who work as an independent contractor.
When you are looking for E & O insurance, consider that these policies vary greatly. With some policies, certain coverages could be excluded. The policy you choose should be based on your business's needs, risk level and budget. In order to make sure you are getting the coverage your business specifically needs, call your J.P. Insurance agent for assistance.