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As a budding entrepreneur, you have many things to ponder. Protecting your business from liability lawsuits is one of the most important issues to consider. You do not want to invest time and money into your business only to realize that an unexpected claim turns into a serious financial setback. If your new business focuses on services offered to clients, you need an errors and omissions insurance, or E&O, policy.
Insurance coverage may protect you in case you’re sued for negligently performing your services. Without proper coverage, one error can have a devastating effect on your business plan.
Owning an errors and omissions policy is similar to owning a life insurance policy. Making sure your family is protected is an important part of being an accountable person. Similarly, protecting your company from lawsuits enables you to move forward without worrying about a lawsuit destroying your organization.
Providing services to customers involves possible errors. Even if the error or omission is unintentional, a disgruntled client may make the decision to file a legal claim against your company.
You have the option to protect your financial assets from possible ruination by choosing to pay a nominal monthly premium for errors and omissions insurance coverage. Your E&O policy also covers employees and independent contractors providing services for your company.
When the topic turns toward filing a lawsuit, even the simplest mistake can count as a weighty factor against your business. Owning an errors and omissions policy assures you that incidents of negligence are not going to affect your bank account. While you may think that a general liability insurance policy covers every possible scenario, it doesn’t cover errors in your services.
An error as simple as giving a potential buyer incorrect information about a piece of real estate property can result in loss of funds. Coverage protects you from paying settlement amounts to claimants. Instead, your errors and omissions policy covers all, or at least most, of the monetary damages.
Unlike slip-and-fall injuries or damages to properties, an errors and omissions insurance policy focuses on professional mistakes and omissions.
For example, your client may complain that you neglected to see a substantial tax reduction while working on their income tax or business tax return. Your professional error of omission causes the client to lose a large refund from the Internal Revenue Service. The client has two options. The person may ask you to file an amended return or sue you for economic negligence. Since there is no way to predict another person’s actions or reactions to professional mistakes, it is best to own a policy that covers any possible errors that may occur.
An errors and omissions policy does not cover the following:
Bear in mind that every policy is different. If you are concerned about a person accusing you of libel or slander, ask an insurance agent if your policy provides this type of coverage.
If you are a self-employed writer working at home, you may typically need this type of coverage. However, an errors and omissions policy including an extra clause about copyright infringement may prove helpful if this type of situation ever takes place. The main reason to have errors and omissions coverage is if you want to protect yourself from possible professional mistakes.
The average consumer today is extremely knowledgeable about professional services. Online reviews and discussions are readily available to anyone with a computer or smartphone. A typical customer reads several reviews before choosing a company. If you are a roofer, your new customers probably already know about your business and the quality of services you provide. When you or one of your contractors makes a mistake, your customer has the right to file a claim. Owning an errors and omissions policy protects you from errors that can cost a small fortune in or out of court.