There could be nothing worse than a client claiming compensation for inadequate work or negligent actions by you. As humans, all of us make errors. But, when it comes to work, clients may get serious and claim against those errors and omissions. In order to protect your profession from those claims, insurance companies offer errors and omissions insurance.
If you've never heard of it then, this article contains all the information you need to know about errors and omissions insurance.
What is an Errors and Omissions Insurance?
Errors and Omissions is a type of insurance that provides coverage to you or your company against a client, holding you responsible for bad service. In some cases, it could merely be due to failure to meet service expectations. The loss you cause to your client is covered by this insurance policy.
Any profession can require the errors and omissions insurance. For doctors, chiropractors, or dentists, they are called as malpractice insurance. However, for engineers, architects, lawyers, or accountants, they are termed as professional liability. The name may vary, but it serves as common coverage to all. Most of the errors and omissions insurance policies cover settlements, defense costs, and judgments.
Why Do You Require Errors and Omissions Insurance?
No one is perfect in their profession. It is a fact that everyone makes mistakes even with the best employees and best practices at work. An aggrieved client may file a lawsuit against you even if the problem could be sorted out. In this case, you will spend thousands of dollars to defend the lawsuit, even if the allegations are groundless. These allegations can bankrupt you and put your license to practise at stake.
If you are a freight forwarder, wedding planner, engineer, marketing manager, doctor, accountant, economist, or belong to any other profession, you will need an error and omission insurance policy. Additionally, your reputation in the market will decrease due to the filed law-suits and litigations. Litigations also come at a price. Thus, individuals and companies into a business of providing service to a client for fee have an exposure to errors and omissions.
What are the Policies and Costs for Errors and Omissions Insurance?
Errors and Omissions' policies vary from profession to profession. There is no single standard policy for this coverage. Policies must be read carefully as their meanings vary for each profession.
The errors and omissions insurance policy is written on a 'claim-made' or 'claim made and reported' form. The 'claim made' form ensures that the claims are made. However, the 'claim made and reported' form ensures that the claims are made and reported within the prescribed policy period.
The cost of the insurance policy varies greatly depending upon the business type, location and claim's experience (insured individual and the industry of the business).
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