When businesses are sued for failing to provide a particular service, errors and omissions insurance provides the necessary protection. This type of insurance covers defense and settlement costs, which accrue over the course of a lawsuit.
Who Needs Insurance
Clients sue businesses for a variety of reasons. E&O insurance is typically reserved for companies that provide services to clients such as medical offices, law firms, and engineering companies. Any business that offers services to clients for a fee is at risk if it does not have this type of coverage. Other companies that could benefit from having a policy include advertising agencies and web hosting companies.
The Importance of Errors and Omissions Insurance
The best time to secure insurance is before an incident occurs. In fact, most clients will not conduct business with a company if it does not have a policy in place. They want to feel safe knowing that they will receive compensation in the event that an error does occur. Businesses that operate within the service industry are in a risky environment. Clients can choose to file a lawsuit at any time, and without the proper protection, businesses may founder under the weight of a lawsuit.
Lawsuits are incredibly expensive procedures. It is possible that a business could owe thousands of dollars to a client, and such a financial burden has the potential to destroy a company. By having E&O insurance, businesses can protect their financial assets.