What is errors and omissions insurance coverage?

Errors and omissions, sometimes called E&O insurance, is a special kind of insurance for professionals who provide services or advice, the Insurance Information Institute says. It can help cover related financial losses if you are sued for harming another person or business through alleged negligence, inaccurate advice, misrepresentation or violation of good faith and fair dealing. For example, E&O insurance may cover the cost of your legal defense, judgments, or settlements in situations like these according to the Insurance Journal.

Many types of businesses and business professionals may benefit from errors and omissions coverage, the III says. They include:

• Real estate agents
• Consultants
• Software developers
• Accountants
• Engineers
• Architects
• Investment advisors

Malpractice insurance, carried by doctors and other medical professionals, is also a specific type of E&O insurance, the Insurance Journal explains.

Keep in mind errors and omissions insurance has deductible and coverage limits. It also does not cover intentional harm or criminal acts.

Your insurance provider can tell you if your insurer offers errors and omissions insurance, which some companies call miscellaneous professional liability insurance. They can advise you on E&O policy options and limits to properly protect your small business based on your specific risks and needs and help you purchase this coverage. Your insurance provider can also review other business insurance options to make sure your business has the right type of protection it needs based on the risks it faces.

Although errors and omissions insurance can help in several situations, it does not cover all business-related liability claims, the III says. For instance, dishonest actions or losses that you intentionally cause is not covered by errors and omissions insurance.

Other types of liability claims, such as discrimination or product liability complaints, are not covered by E&O insurance. However, you may be able to purchase separate coverage to help protect yourself against those types of claims.

You may want to consider other types of business insurance to help protect you against scenarios not covered by errors and omissions insurance. For instance:

• Commercial general liability coverage. This coverage is typically part of a standard business owners policy. It may help pay for costs such as your legal expenses or another person's medical bills resulting from an accident at your business.
• Product liability insurance. This coverage helps pay for expenses that result if a product that your business designs, makes or sells injures another person or damages their property.
• Employment practices liability insurance. This coverage helps pay for legal expenses if your business is sued by an employee or contractor for certain reasons, such as discrimination, retaliation or wrongful termination.
• Non-owned auto liability insurance. If you have employees who use their personal vehicles, rather than a company-owned vehicle, to conduct business, this type of insurance helps pay for another person's medical bills or property damage if your employee causes an accident while on the job.
• Data compromise coverage. This coverage helps a business pay for certain costs that result from a data breach, such as creating informational materials and providing credit monitoring services for affected people or helping pay for related legal fees.

Errors and omissions insurance is among the types of liability protection that may benefit a small business owner. By understanding how each type of liability protection works and choosing the coverage that fits your needs, you can run your business with greater peace of mind.