General liability insurance covers claims of bodily injury and/or property damage for which your business is legally liable. For certain professions, this may not be enough. Consider the following information about errors and omissions insurance and why it may be important to your business:
Do You Need a Separate Policy for Professional Errors and Omissions?
Yes. "Professional liability" claims, including errors and omissions, are excluded from a standard general liability and homeowners insurance policies.
What Does Errors and Omissions Insurance Cover?
Errors and omissions insurance is a type of "professional liability" insurance. This insurance covers the negligence, errors or omissions of a business and pays the financial damages awarded in lawsuits filed by a third partytypically a client.
This coverage exists because there are situations when financial damages suffered by a client as a result of your or your business' negligence do not fit the definition of "bodily injury" or "property damage" found in the general liability policy.
Examples of errors and omissions claims include a bookkeeping error by a financial advisor resulting in lost funds, faulty design by an architect resulting in structural damage or an error by a CPA causing a client to pay penalties or failing to qualify for a loan.
Who Needs Errors and Omissions Insurance?
Errors and omissions insurance is available for many different types of professionals and businesses, and comes in many different forms. For example, a medical care provider has different risks associated with his or her profession than an attorney. Both have the need for errors and omissions insurance, yet each needs a completely different type of professional liability coverage.
Consider the standard of care attributed to your industry. Almost every profession with an established standard of care should consider errors and omissions insurance. If the negligence, error or omission of you or anyone representing your business can cause damage to a client, there likely is a form of errors and omissions insurance for your type of business.
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