Errors and omissions insurance is a type of business liability insurance sold to professionals, such as architects, insurance agents, real estate brokers and many others. Commonly referred to as E&O insurance, the policy protects business people in case they make a mistake or omission as part of their work and are sued. The policy helps pay the professional's legal defense costs and any damage awards.
E&O insurance does not cover policyholders if they intentionally cause harm or commit fraud. The policies also have limits on how much they pay for legal defense and damages, and each is tailored to the profession of the policyholder.
Even if you perform your duties with the utmost professionalism and with perfectionistic attention to detail, E&O insurance is a good idea. Why? You can be sued and face huge legal bills even when you did nothing wrong. You can even be sued if someone else made a mistake and you just happened to be involved in a transaction.
Insurance companies that specialize in commercial insurance sell E&O policies. Work with an insurance broker you trust who is familiar with your profession. Compare insurance quotes, but don't go by price alone. You want a policy designed to meet your needs and address the risks you face. A cheap policy that doesn't protect you is a waste of money.
When applying for E&O insurance, you'll need to tell the insurance company about your business, disclose annual revenues, and perhaps provide financial reports and information about management. The insurer needs this information to determine the risk you face so it can price the policy appropriately.
A variety of factors influence how much you pay for E&O insurance, including your profession, the size of your business, annual revenue, claims history and the breadth and limits of the policy.
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