Common questions about Errors and Omissions Insurance.
Why hasn’t my agent told me about Errors and Omissions Insurance? Your insurance agent may not have discussed Errors and Omissions Insurance with you for a number of reasons. First, he may not feel you need the policy or have adequate exposure based on the kind of work you do. If you feel that this is not the case – or have an exposure that you have not discussed with your insurance agent – be sure to ask about it in your next conversation. Secondly, your insurance agent may not be comfortable with the product or have a lot of experience with Errors and Omissions Insurance. If you have bought your business or professional insurance through an agent who normally works with personal lines customers, then he or she may not have access to the range of products that your business requires. Additionally, if your agent does not normally work with business owners in your line of work, he may not be familiar with the specific Errors and Omissions needs of your business. If you would like to discuss your situation with someone who knows more about Errors and Omissions Insurance, your current insurance agent may be able to provide you with a referral to a colleague who is more familiar with that type of policy.
Do I need Errors and Omissions Insurance? If you own any kind of business, the answer is yes. E&O, along with disability insurance, should be part of every business owner's inurance protection package. Any professional or business that takes a fee for providing services can have an exposure to lawsuits caused by errors or omissions. While certain kinds of professions are more prone to these kinds of suits, that does not mean that other businesses will not benefit from buying an Errors and Omissions Insurance policy. E&O should be a standard part of every company's business insurance package.
The best way to assess your needs is with the help of an insurance agent who is familiar with Errors and Omissions Insurance and other kinds of professional liability risks. You may also want to talk to other professionals in your field, or a representative from your professional organization who is informed about insurance to find out what kind of coverage has generally been purchased by others in your line of work. In general, if your business would suffer dramatically if you were sued because of an error and there is some possibility that could occur, you may want to consider purchasing a policy.
Is Errors and Omissions Insurance expensive? When talking about insurance “expensive” is a relative term. What seems pricey to a small business or a professional in private practice could be a minor expense to a large corporation. In general, the cost of Errors and Omissions Insurance coverage is based on the risk that a particular business owner or professional will be sued for an error or mistake, and on the possible amount of damages that that kind of lawsuit could incur. A business that is sued regularly for small amounts may not spend as much, comparatively, on Errors and Omissions Insurance as another business that is sued rarely but with extremely costly suits. Some fields – such as medicine – are subject to extremely large lawsuits because the errors involved can include permanent physical injury and/or death, and judgments for those kinds of suits can be enormous. That is why Medical Malpractice Insurance is comparatively expensive when compared to other kinds of professional liability and Errors and Omissions Insurance. For a professional who does graphic design work, the cost of Errors and Omissions Insurance may be quite small because the chance of being sued is also limited. However, just because someone is less likely to be sued does not mean that it is impossible that he or she will be hit with an expensive judgment, so it can be wise for all professionals who do work for fees to consider Errors and Omissions Insurance as part of the coverage they obtain for their business.
How does Errors and Omissions Insurance work? An Errors and Omissions Insurance policy will pay the costs of a lawsuit caused by an error in the work of a business owner, professional, or employee done for a client. In general, this refers to lawsuits that are not triggered by a loss due to bodily injury or property damage, since those losses are usually covered under the General Liability Insurance policy. The Errors and Omissions Insurance policy will pay the court and legal costs of defending the insured against the suit and some or all of any damages or settlements that are incurred, depending on the limits of the policy and any applicable laws. The damages paid by this type of policy are financial damages done to a third party because of mistakes or problems in the work of the insured.
How do I determine how much Errors and Omissions Insurance I need? How much Errors and Omissions Insurance you need depends on the kind of business and the annual revenue of your business, as well as your overall exposure to potential lawsuits and claims. Some professionals are required to have a certain amount of insurance because of state or local regulations or laws, or due to licensing requirements. In addition, some employers will require that employees carry a minimum amount of coverage. One of the most common policy sizes is $1 million per occurrence and $1 million to $3 million per year.
What is the minimum for Errors and Omissions Insurance? The minimum for Errors and Omissions Insurance varies based on the occupation of the business or professional. In some cases minimums may be dictated by state or local law, especially in the case of Medical Malpractice Insurance or in highly regulated industries. Many professionals carry as much as $1 million or more in coverage, but policies can be found with as little as $100,000 in coverage as well. For most businesses, the minimum amount of insurance will be determined by the likelihood of a lawsuit and the business’s ability to withstand financial damages.
Does my Errors and Omissions Insurance have to be with the same company as my other insurance policies? No, it is not necessary that the Errors and Omissions Insurance policy be with the same company as the business’s other insurance. In some cases, other insurers may not provide Errors and Omissions Insurance or may not have the best rate for your specific business. However, some insurers do provide discounts to customers who have multiple policies with them so you may want to consider using the same insurer if you receive a worthwhile discount. For businesses with very little Errors and Omissions risk, a rider attached to their General Liability Insurance policy may be sufficient.
What questions will the insurance agent ask when I call? In most cases an insurance agent for an Errors and Omissions policy will want to know about the business being insured, the kind of work done there, how many employees are involved in that work; the company’s annual revenues; and if the company has had claims in the past. In some cases, agents may also want to know if the company has clients sign a contract, and see that contract to determine if there are quality controls and training programs in place. In general, the agent is trying to assess the business’s exposure to Errors and Omissions Liability to find the insurance product that best suits its needs.
What does the insurance rating system mean and how can I find out how my insurance company is rated? All insurance companies are rated by firms that specialize in assessing the financial strength of financial companies. A. M. Best is one of the best-known companies for insurance company ratings, but others include Moody’s Investors Service, Standard & Poor’s, and Fitch. Each company has its own system for grading companies. In general, higher rated companies are more stable and more likely to pay claims, so it is important for a buyer of insurance products to be comfortable with the rating of any insurer with whom they are doing business. A.M. Best assigns letter grades to insurers, with A++ being the highest. Any insurance company with a rating less than B is considered “fair” and those with lower grades are potentially in financial trouble. Ratings can be found on A.M. Best’s Web site, and many insurers freely advertise their ratings in their own documentation.
Errors and Omissions Insurance Tips - Home