There are several types of policies that businesses in Scottsdale need to have. E&O insurance is one of them and is one of the most often misunderstood coverages. Here’s a quick explanation of how much E&O insurance you need.
What Is E&O Insurance?
E&O insurance, or Errors and Omissions Insurance, is a type of professional liability insurance that protects business owners from claims of negligence or inadequate performance. E&O coverage can often help protect against financial losses resulting from mistakes or oversights made in the course of providing professional services to their clients. Frequently, these type of claims are largely baseless. However, your firm could incur significant expense simply paying for the defense of such claims. An E&O policy helps pay for the legal expenses in addition to any judgment that could be entered against your firm. E&O insurance is an essential tool for any business owner who provides services to clients and wants to protect their reputation and finances.
Who Needs E&O Insurance?
Here is a short list of the typical types of businesses that benefit from E&O insurance, and there are many more.
- Professional Service Providers (Attorneys, Accountants, Financial Advisors, Architects)
- IT Professionals and Consultants
- Real Estate Agents & Brokers
- Business Coaches & Consultants
- Event Planners & Organizers
- Healthcare Professionals (Doctors, Nurses, Dentists)
- Contractors that provide Design Services
In reality, any company where you’re offering a professional service should have E&O Insurance. Many times firms think that their General Liability policy will cover these types of claims. However, General Liability claims will only cover bodily injury or property damage.
How Much E&O Insurance Do You Need?
The amount of E&O insurance needed depends on the size and scope of your business and the particular services you provide. Your E&O policy should include enough coverage to protect against potential losses resulting from negligence or errors in your professional practice, as well as any judgments that may be rendered against you. To determine precisely how much E&O insurance you need, it is recommended that you consult with an E&O insurance advisor to discuss your specific business needs and get a tailored policy recommendation.
What Does E&O Not Cover?
So, what does an E&O policy NOT cover? Good question. Here’s a short list:
- Intentional or criminal acts.
- Protection against personal injury, bodily injury or property damage, or advertising liability claims. These types of claims would be covered by a General Liability policy.
- Any business activities outside of the scope of a professional’s services. This is an important point! E&O Policies will generally have a section that specifically outlines the scope of professional services that are covered. For example if you are a real estate agent, your policy will specifically outline the real estate activities that are covered. If you provide advice to a homebuyer on how much homeowners insurance they need to purchase and you’re wrong, that would NOT be covered because you provided insurance advice.
- Consequential damages, such as lost profits or lost business opportunities.
- Protection against regulatory proceedings or government investigations.
What Is The Limit Of Liability For E&O?
The limit of liability for E&O insurance is the maximum amount a policy will pay out in case of a claim. This limit is typically expressed as an aggregate, meaning it’s the total amount that can be paid out for all claims made during the policy period. E&O policies also often include a per-claim limit, which is the maximum amount of coverage provided per claim. E&O insurance limits vary depending on your business needs and the particular E&O coverage you choose, so it’s important to consult with an E&O insurance expert to determine the right limit for you.
Business liability insurance helps keep your business going in the face of unexpected setbacks, and E&O insurance is essential for businesses that provide professional services.. From Attorneys to Architects, any professional service business needs to look into a good Errors and Omissions policy.