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3 Things to Consider When Purchasing E&O Insurance


3 Things to Consider When Purchasing E&O Insurance
Errors and omissions (E&O) insurance is the essential policy that covers a business or individual consultant in the event that a client accuses them of being responsible for a wrongdoing in a service they provided, or failed to provide. E&O insurance may be called by different names; for example, in the medical field it is often referred to as malpractice insurance and for some types of professionals in may be called professional liability. No matter the name, it serves the same purpose: protecting the insured from claims of errors or omissions that they have been accused of making.

Regardless of whether the claims are truthful or groundless, the cost of defense can put a great amount of financial strain on the accused company or individual. E&O coverage removes that strain by covering costs associated with defending or settling an E&O claim against the insured party.

When purchasing E&O insurance, there are a few things to keep in mind. These points should be discussed, especially if you are working with an insurance specialist who focuses on professional liability risks, so they can help you find the best E&O policy for your needs. Here are three things to consider when purchasing E&O insurance for yourself or your business:

1. Consider your risk exposure.

Some types of professions are more exposed to risk than others. Regardless of the quality of work performed, there are industries that are more likely to have E&O claims filed against them. Different industries will also have different risk exposures, all of which can affect their chances of claims in different ways. Additionally, in some professions, the cost and the impact of lawsuits can be higher than others.

2. Determine how much coverage you need.

Your insurance agent will advise you on industry and specific business requirements, however, it’s important to consider your own coverage needs as well. Look into any recent lawsuits in your industry or a very similar one, and consider what the costs would look like if you were hit with the same type of claim. The true cost of a claim is more than just defense and settlement. Direct and indirect expenses such as deductibles, premium increases, extra working hours for staff and potential loss of clients as a result of reputation degradation can add up quickly. At the very least, you want to make sure that your basic defense costs are generously covered so that you are not burdened with inadequate insurance coverage while dealing with additional expenses.

3. Know what isn’t covered.

E&O is designed for cases where an accident made by the insured caused a financial loss for the insured’s client. It does not cover acts that were intentionally malicious, dishonest, or illegal. Additionally, it does not cover physical damage or bodily harm that occurred on your business property, nor does it cover claims made by your own employees. Make sure to carefully review the exclusions of your E&O coverage with your agent.

About Axis Insurance Services

Axis Insurance Services specializes in providing employers with EPLI coverage and would be happy to discuss this must-have protection with you, particularly critical in today’s litigious environment. Just give us a call at (201) 847-9175.

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Blogged on: April 2, 2018 by Mike Smith
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