Why E & O Insurance Matters

Protecting one’s professional status is crucial, especially to smaller business people who must rely upon their reputations in order to sustain their businesses. With this in mind, e & o coverage is an important resource in helping professionals protects their businesses and their reputations. Clients are likely to make any type of claim whether they have a valid grievance or are looking to cash in on a large settlement. In either case, a professional needs to have this coverage to avoid having to pay legal fees and any settlements out of pocket.

Errors and omissions insurance is usually not covered under common policies such as general liability and commercial property insurance. Rather, this coverage is much like malpractice insurance in that it protects the policy holder when a client claims that his or her service or failure to adequately perform the service has resulted in some kind of harm. Even if this claim is found to be without merit, the professional is still responsible for the legal defense fees. However, if the result is unfavorable, the insurance will pay the damages up to a certain amount.

E & O insurance is also called professional liability insurance. Policies will differ according to a number of factors including the industry in which the professional works as well as the location of his or her practice. In fact, some states make it mandatory for professionals to carry this particular coverage. The minimum amount of this coverage varies from state to state and may also differ according to each industry’s standards. Each individual has to decide whether this minimum amount is sufficient to accommodate expected coverage needs.

It is usually best to try to acquire this insurance before one begins to practice because it will be less expensive and easier to find with a clean record. It also shows that the professional is taking precautions already to protect the business, so insurance carriers may be more likely to see this individual as a good risk. Having this coverage can also make smaller businesses more attractive to potential investors and investor capitalists, who sometimes require this coverage, when they are looking to expand their operations.

Professionals should keep in mind that e & o coverage provides a safety net for their businesses and keeps them from practicing their trades without fear that a mistake can permanently ruin their reputations. Whether one is at fault or not is irrelevant in the case of this type of policy. There is always the risk that a lawsuit will occur, so one must be adequately prepared. Getting the right kind of insurance with enough coverage can be the difference between a successful business endeavor or losing one’s business for good.


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