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Errors and Omissions Insurance: What Is E&O Coverage?
Making a mistake, or just being accused of one, can create legal problems. Errors and omissions insurance may help.
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Errors and omissions insurance, also called E&O insurance, protects businesses against claims of mistakes, negligence, inadequate work, inaccuracies, misrepresentation or similar allegations.
Your business should have E&O insurance if it provides services to customers for a fee.
What is errors and omissions insurance?
E&O insurance is business insurance coverage that protects your company if someone accuses you of making a mistake.
Errors and omissions insurance may cover you if you’re accused of the following:
Errors or oversights in your work.
Failure to deliver a service or missed deadlines.
Professional negligence or failure to meet a standard of care.
Errors and omissions insurance is a common type of coverage that all major commercial insurers offer.
If you need E&O coverage quickly: Consider Next Insurance and biBERK, both of which allow users to get quotes and then purchase insurance policies online.
If you’re interested in a business owner's policy: Consider The Hartford and State Farm. Both allow customers to tack E&O insurance onto a business owner’s policy, which is an insurance package that also includes general liability and commercial property insurance. Bundling coverage can make your shopping experience easier and help you save money.
If you needinsurance for a home-based business: Note that you can’t get errors and omissions insurance under homeowners insurance endorsements or in-home business policies. You’ll need to buy a separate policy.
NerdWallet recommends getting quotes from several insurance companies so you can compare costs and coverage details.
What's the best fit for your business?
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In general, errors and omissions insurance policies are claims-made policies, which means coverage must be in place at the time a claim is made in order for the insurer to cover it. If your coverage lapses, you’ll no longer be protected.
E&O insurance policies can be retroactive to a specific date defined in the policy. That means they’ll cover claims of alleged mistakes dating back to that point, but not before.
Who needs errors and omissions insurance?
If you provide professional services to customers for a fee, you should have some form of errors and omissions insurance.
Those professions might include:
Financial and investment advising.
Some professionals are required to carry E&O insurance, whether it’s by law, licensing boards or professional associations. For example, Tennessee and Rhode Island both require real estate agents to have E&O policies in place in order to be licensed.
Businesses that provide services to customers for a fee likely need errors and omissions insurance or another kind of professional liability insurance. Some of your clients, business partners or licensing boards might also require you to have E&O insurance.
Claims against your business may not be covered. Errors and omissions insurance is typically “claims-made,” which means the policy has to be in effect when the event took place and when a lawsuit is filed in order for the insurer to pay the claim.
Often, professional liability insurance is simply another term for errors and omissions insurance. Which term is used typically varies by industry. For example, legal and medical malpractice insurance are unique types of professional liability insurance.