Get the Best Errors and Omissions Insurance for April 2024
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Every professional knows that things sometimes go wrong. When a service is not performed as advertised there can be legal repercussions. Maybe you are an architect working in Toronto who has been unable to deliver a design that meets a client’s specifications and is being sued. Or you are a doctor based out of Winnipeg who provided a misdiagnosis and now finds yourself facing a medical malpractice lawsuit.
Whatever the case, errors and omissions Insurance is there to protect both you and your employees from the fallout.
Legal proceedings can be prohibitively expensive and without the right protection, businesses can find themselves bearing the brunt of these costs and closing as a result. It pays to have the right kind of insurance coverage. This guide will cover what errors and omissions insurance is, why it’s important, who needs it and how to get the right policy.
What is errors and omissions insurance?
Errors and omissions insurance, often also referred to as professional liability insurance, is a form of business coverage that protects working professionals against negligence and malpractice claims launched by their former clients.
While the term is often used to refer to real estate, the range of jobs and positions covered by this type of insurance policy runs the gamut from engineers and architects to wedding planners, lawyers, accountants and doctors to name just a few. It usually features as an add-on to pre-existing general liability insurance policies purchased for a business that does not cover claims and lawsuits resulting from alleged negligence, malpractice and misrepresentation. In most cases, errors and omissions insurance will cover you and your business’s costs and fees up to a certain amount against a range of claims specified by your policy while it is still active.
Expert advice
In medicine, this form of insurance is often referred to as malpractice insurance.
Why do I need errors and omissions insurance?
You need E&O, or malpractice, insurance because the cost of not having it can easily endanger the health of your business and the well-being of your employees. Whichever profession you are working in, sometimes things go wrong. When they do, a client may sue you. A decision against you can easily end up in the millions. Even if you're in the right, the legal fees for a good defence may still prove expensive.
This is a financial burden most businesses, small or medium size, are ill-equipped to handle. For a list of professions that might want to seriously consider obtaining errors and omissions insurance, see below:
- Consultants
- Accountants or auditors
- Architects
- Engineers
- Insurance professionals
- Real estate agents or brokers
- Medical professionals, including doctors, dentists and cosmetic surgeons
- Self-employed entrepreneurs
- Personal trainer
- Copywriter
- Financial planners
- Non-profits
- General maintenance companies
- Wedding planners
- Contractors
How much does E&O insurance cost?
Like any insurance policy, the cost of your E&O insurance will depend upon a variety of factors, that include but are not limited to the following:
- Industry and service offered
- Years of experience
- Size and number of employees
- Annual and projected revenues
- Claims history
If you have a series of ongoing litigation cases, the cost of underwriting your policy will be more expensive. While rates typically begin at around $250 per year, this is for a policy with the most restrictive form of coverage available, maxing out at $100,000. Many policies are in the realm of $1-2 million. With that figure in mind, some insurance companies put the cost for most small businesses anywhere between $500 and $1,000 a year. Because of their greater liabilty, larger companies with more employees will pay more than smaller companies with fewer.
It cannot be stressed enough though — every business is different, so if you want to know how much your policy will cost, talk with a licensed insurance broker.
Better protection for your business today
What does errors and omissions insurance cover?
Errors and omissions insurance protects you against claims launched by a client or allegations of monetary loss as a result of a service you or your company provided or negligence, misconduct, misrepresentation or failure to render a service as advertised. In most contexts, it will cover damages and legal costs usually up to $1-2 million, depending on the policy. The circumstances in which it comes into effect are typically the following:
| Coverage type | About |
|---|---|
| Negligent Acts | When negligence or an error and/or omission pertaining to your professional service results in a failure to deliver a service as advertised. |
| Media Services | When media services and/or publicity provided by you either purposefully or not results in a client getting sued for slander, libel or defamation. |
| Product Failure | When a product either sold or distributed by your and your business fails to function as advertised and results in harm and/or injury to the client in question. |
What does errors and omissions insurance not cover?
In most cases, errors and omissions insurance will not cover costs related to a criminal prosecution, or liabilities that may arise in a civil court that are not detailed in the given insurance policy. Other common gaps in coverage can include but are not limited to the following:
- Illegal activities, intentional wrongdoing or other forms of criminal activity.
- Bodily injury, which is typically covered by general liability insurance.
- Violation of government securities acts.
- Temporary employees, due to work being done before or after the policy was in force and competing jurisdictions.
- Cybercrime, data breaches and other tech issues that are typically covered by cyber security insurance.
- Discrimination claims.
- Cost estimates/guarantees or projected profits/economic returns
How much E&O insurance do I need?
It really depends. Most policies offer protection in the region of $1-2 million, however, depending on the industry you work in, you may want a larger of smaller policy.
This is the case with medical practitioners or those working on large construction projects, where either there is the potential for life-altering injury, or the sums of money involved are sufficiently large that any resulting lawsuit would be for much more than $2 million. On the other hand, if you are a copywriter for provincial clothing lines, you may be just fine opting for a policy with lower protections for a lower cost.
To get the best idea of the requirements for you and your line of work, it is always best to talk to a licensed provider. You can start comparing E&O and other business insurance coverage right here.
Better protection for your business today
What is the difference between general business liability insurance and E&O insurance?
The two are different but are both highly recommended.
General liability insurance provides coverage against third-party claims for bodily injury, property damage or damages inflicted by a given company's products. Errors and omissions insurance pertains to the actual functioning of a company and the way it provides its services. Lawsuits therein will allege a gap between what was advertised by a specific party and what was provided, unlike general liability insurance.
In many cases errors and omission insurance will be an add-on to an existing or bundled general liability insurance policy.
Can I bundle professional liability insurance with other types of insurance for my business?
You can. What’s more, this is common practice in the insurance industry. By attaching smaller policies and add-ons like E&O insurance under the umbrella of a larger business insurance policy, you will often find yourself paying a lower premium than you may have otherwise.
Here is an example to illustrate the point:
For example
Janet runs a small construction firm in Calgary with six employees and upon renewing her commercial fleet insurance notes that she can obtain E&O insurance alongside her property insurance. What is more, while she was going to pay a premium of $3,000 dollars per year for her E&O insurance, by bundling her policies her premium is now $2,500. She saves hundreds per month by bundling her existing policies which frees up enough money to let her hire a part-time receptionist.
