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The Importance of Errors and Omissions Insurance
How E&O Insurance Protects Your Business
Businesses operate in a world where risk is ever-present. The more they take on, the greater their exposure to risks. This is especially true for businesses operating in a highly competitive environment, where failure to perform adequately could have serious consequences. This is where errors and omissions insurance comes in. This article will cover the importance of errors and omissions insurance and how it protects your business.
What is Errors and Omissions Insurance?
Errors and omissions insurance is also known as professional liability insurance. It protects your business from legal claims made by clients, customers, or other third parties. This type of insurance covers any wrongful act committed in your business by an employee or contractor while performing their duties. Errors and omissions insurance is often used if a customer files a lawsuit against your company over any wrongdoing they believe you have committed.
What Does Errors and Omissions Insurance Cover?
Errors and omissions insurance is a type of business insurance that covers legal liability for damages caused by mistakes or negligence. Essentially, errors and omissions insurance is a way to protect your business from financial losses related to professional mistakes. E&O also covers damages that result in court fees and settlements and defense costs like hiring experts and lawyers.
Why Does Your Business Need E&O Insurance?
Every business is at risk for errors and omissions. As a business owner, you should be aware of the potential consequences that could arise from these types of mistakes. For example, if you or an employee promised customers the wrong product or service, this could significantly lose revenue. Errors like this can also cause your customers to be dissatisfied with your business. With errors and omissions insurance, there's peace of mind knowing that these types of issues are protected financially. For more information, head over to The Hartford, where you can explore their expert guide on errors and omissions insurance and how you can get it for your business.
What Factors Affect Your E&O Insurance Costs
The cost of errors and omissions insurance is largely dependent on three factors: the business risk, the claim history, and location. Business risk refers to the magnitude and probability of a particular type of loss happening. For example, an accounting firm that provides advice and services to a wide range of clients is at higher risk. Claim history refers to how many claims have been filed against your company over time. The more claims there are, the higher your rates will be. Location is also important because it plays into both business risk and claims likelihood. If you're in an area where there's lots of competition or large numbers of potential claimants, for example, your costs will go up.
Keeping Insurance Costs Down with Staff Training
Employees are a company's greatest asset, and most of them will be executing your risk management plans. As such, it is crucial to make sure that they are adequately trained to execute those plans. The best way to reduce the likelihood of a claim and keep the costs of errors and omissions insurance down is by investing in employee training.