There are many reasons to enjoy being a small business owner, from setting your own hours to being able to chart your own course of action. These benefits and others are just a few of the reasons that small business owners tend to be some of the most satisfied people in the country as a whole.
That doesn’t mean there aren’t many challenges and obstacles they have to face, however. There’s a lot that stands between a small business owner and success.
Ensuring they aren’t liable for errors and omissions is one of the major ways small business owners protect their businesses. Is error and omission insurance something that you might want to consider for your own business? What does it accomplish?
Read on and we’ll walk you through everything that you have to know.
What is Errors and Omissions Insurance?
So, what exactly is errors and omissions insurance?
Put simply, this is a form of insurance that helps to protect your business against lawsuits claiming that you made a mistake while conducting professional services.
If you were to have to head to court because someone wanted to bring a lawsuit against you, it could become very costly to your business, even if you ended up winning the case.
Going to court and dealing with legal issues in any manner is always going to be a burden on your bottom line. When you run a public-facing business, however, the threat of potential litigation is always present.
As such, it can be smart to ensure that you are protected and can’t be financially damaged by any court cases that might come your way. Errors and omissions insurance ensures that if you are brought to court, there is a plan in place to help cover the associated costs.
Errors and omissions insurance often attempts to cover both general court costs and settlement payouts from business-related court cases.
If you’re facing a lawsuit that claims your business acted negligently, violated a good-faith deal, or gave inaccurate advice or information, this kind of insurance can make a major difference.
This kind of insurance can also cover attorney fees for any legal representation that you hire, as well as any general administrative costs. It is sometimes known as professional liability insurance as well.
Exceptions to Coverage
There are some instances where an error and omissions insurance plan might not cover some court-related costs.
If a case was filed outside of the window of time in which you applied for coverage, you won’t be able to make a claim and receive compensation.
If the lawsuit you are facing is for a more serious charge than a simple error or omission, you’ll be forced to handle those legal costs on your own as well. For example, errors and omissions coverage is not going to help you battle against charges of embezzlement.
If you do something intentionally illegal, you’ll be on your own.
It also won’t cover lawsuits related to injury or property damage. If someone has been injured on your property by slipping and falling, this insurance plan won’t cover those costs.
If employees of yours sue your business due to work-related injuries, discrimination, or harassment, your insurance won’t be able to help you cover the cost of these cases, either.
Why Do You Need E&O Coverage?
Why should you be talking to an E&O carrier about getting a coverage policy for your business as soon as possible? Any business in any industry that wants to take themselves seriously needs to have this kind of coverage in place.
Failure to take out this kind of plan could put your business at risk of continuing to operate. Legal expenses can be so much that there’s almost no way a small enterprise can stand up against them.
Thousands of dollars could be pulled from your accounts, all to cover a claim that you might not even be guilty of. Most small businesses do not have the extra cash to be able to afford to handle such claims.
Even one might be enough to shut down your business entirely. Having errors and omissions coverage in place can help to ensure this does not become a reality for you and your new enterprise.
Costs of Professional Liability Insurance
If you want to get coverage for your business, you might be curious how much you’ll need to pay monthly. This won’t be the same for every business, as different businesses take on different levels of risk.
The higher the risk industry that you do work in, the higher the cost of errors and omissions insurance you’ll need to pay. Financial consultants with million to billion-dollar clients, for example, are likely going to be charged quite a bit for a strong professional liability insurance plan.
Different plans also have different coverage limitations. The more limitations your plan has, the more affordable it should be month-by-month.
Your previous legal history will also likely be looked into by the insurance agency. If you’ve faced a number of legal charges in the past with your business, you’ll be more likely to be asked to pay higher for an E&O plan.
Understanding E&O Coverage
If you’re running a small business and want to protect your long-term interests, you’ll need to get familiar with errors and omissions insurance information.
This kind of insurance plan can ensure that your business will continue to run far into the future without fear of constant financial liability.
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