Errors and Omissions Insurance: What is E&O Coverage?

errors and omissions insurance

In an organization with real people, mistakes are bound to happen. Errors and Omissions (E&O) Insurance provides a financial shield for businesses in the event of oversights, misjudgments, and failures to meet expected standards. Whether you are a financial advisor, an accountant, or own a small business, E&O coverage is essential for mitigating the consequences of potential mistakes.

What is Errors and Omissions Insurance?

Errors and Omissions Insurance, commonly called E&O insurance, is a specialized business insurance designed to protect businesses against financial loss from a professional mistake or negligence. This kind of insurance protects liabilities not covered in a business liability policy. Business liability covers events like bodily injury and property damage. However, this policy would not cover a data entry mistake on a large order of sweatshirts or a failed HVAC repair. E&O Insurance provides financial coverage for legal expenses and damages from a covered event.

The average E&O policy for a small business costs $61 per month. A business’s premium varies depending on the size of the business, revenue, location, past claims, and the policy’s limits. An E&O policy will cover errors and omissions made by the business owner, salaried employees, hourly employees, and contracted employees. Understanding these key features of E&O Insurance is essential for professionals seeking to mitigate their financial and reputational risk.

What does E&O Insurance Cover?

The term “errors” refers to unintentional mistakes made by professionals while doing their job. This can include errors in calculations, advice, documentation, and more. “Omissions” means a failure to perform certain actions or provide certain information. This occurs when professionals fail to fulfill a contractual obligation or omit critical information. Omissions can also include misrepresentation like false or misleading statements. Here are some examples of E&O Claims:

  • A tax accountant makes a mistake on a family’s annual tax return.
  • A real estate professional leaves out information on a property.
  • An electrician fails to repair.
  • A plumber only completes half of their contracted work.

What is Not Covered under E&O Insurance?

Though this policy covers many professional mistakes, some events are not covered. This policy does not cover events covered under general liability, like property damage and bodily injury. This exemplifies the need for a comprehensive insurance portfolio. Additionally, employment issues, like wrongful termination and harassment, are covered under a different policy. Even if it is the organization’s fault, work-related injuries are not covered under errors & omissions insurance. Worker’s compensation insurance provides coverage for all work-related injuries regardless of fault.

Who Needs E&O Insurance?

Almost every business or professional can benefit from holding an E&O policy. However, it may be more pertinent for some vocations, particularly those that offer services where advice, expertise, and judgment play a role. Here are some professions that should strongly consider E&O insurance:

  • Legal Professionals
  • Financial Advisors
  • Accountants
  • Medical Professionals
  • Real Estate Agents
  • Electricians
  • HVAC
  • Plumbers.

Certain states and jurisdictions require E&O insurance for certain professions like lawyers and medical professionals. Most businesses are not required to hold this policy; however, it is best practice to protect your business with this policy.

Choosing the Right E&O Insurance Policy

As you search for the right errors and omissions policy for your business, working with a trusted insurance company that shares your commitment to protection, reliability, and security is important. Masters Insurance is here to help your business, whether small or large, create a personalized insurance portfolio that gives you financial security and peace of mind. Our team is ready to provide you with the expert advice, personalized service, and reliable support you deserve. Secure your company’s future with confidence. Contact Masters Insurance today and experience the difference of having a trusted family by your side.

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