subject: Errors And Omissions Insurance-5 Frequently Asked Questions [print this page] Many companies are not even aware of what errors and omissions insurance (E&O) is, let alone why they need it. However, for many firms it can be a lifesaver. It can definitely save your company a lot of money in the right circumstances.
#1) What is E&O coverage?
It insures companies in the event they are sued for mistakes they make in delivering the service. This is not covered with property coverage.
#2) What does it pay for?
It will cover the costs if the court rules in the customers favor, and also the price of the attorneys as well.
#3) Who should use it?
Some people recommend that every company take out an E&O policy, but this is not necessary. It really is best for those who are likely to be sued, and for high dollars amounts they would not be able to afford.
Obviously, in theory this could happen to any company. However, some businesses obviously are much more at risk than others are. For instance, if your construction firm builds $1,000,000 houses and something goes wrong, they have a lot higher risk than a company that sells paperclips and screws up an order.
In addition, many companies can avert any potential dangers by simply saying on their product or service that they cannot be held liable. Therefore, really this highly specialized insurance is only necessary for professionals like doctors, attorneys, construction companies, etc. Really, if you have the risk of making a high priced error that could cost the client a lot of money, it would be wise to get errors and omissions insurance.
#4) How much is it going to cost you?
The truth is, this coverage is extremely unique because there is no standard market policy that everything can be compared with. It depends entirely on your company and also how high the stakes are. The higher priced your transaction amounts are for, the more you can be sued for.
Therefore, to get a good price quote, you will likely need the underwriter for the insurance firm to assess your company on an individual basis. Make sure to tell them the dollar amounts you need covered. This will enable them to give you an accurate quote.
#5) How do you find the best company?
Shopping for E&O coverage is much different from any other kind, because it is so highly individualized. For this reason, you might want to read reviews online of the different companies to see which is the best. Simply get a number quotes, narrow down your choices, and then read reviews of the firms you are considering.
The bottom line-errors and omissions insurance is an important piece of coverage to get if you are a company that has the risk of being sued for high amounts.
by: Bob Roberts
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