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What Is Professional Liability Insurance/Errors and Omission Insurance?

Even if you’re an expert in your business, you may make a mistake. If the client or customer thinks the mistake impacted them financially, you may be sued. Professional liability insurance, also known as errors and omissions insurance, or E&O insurance, helps cover you and your company if you are found negligent in the professional services you provided.

Professional liability insurance helps protect you and your company against a claim that professional advice or services you provided caused a client or customer financial harm due to mistakes on your business’s part or because the business failed to perform some service.

For example, if you are an accountant or bookkeeper and make a clerical error that costs a client thousands of dollars or if you work as a photographer and accidentally damage a client’s wedding photos – claims in these situations could have costly legal repercussions. Professional liability insurance will help cover the costs and fees associated with resolving such incidents, including legal fees and damages awarded.

One thing to consider when choosing a Professional Liability insurance provider is that many professional liability insurance policies are written on a “claims made” basis with a retroactive time frame. For example, if a claim is made against you for an act that happened before the retroactive date on the policy, that claim won’t be covered. So when selecting your Professional Liability policy consider the retroactive date and remember, generally the farther back the date, the better.

Who Needs Professional Liability Insurance?

If you work directly with customers by providing services, consider a professional liability insurance policy. A customer or client can sue even if you’ve done nothing wrong. If a customer or client believes for example, they received inferior service, mistakes were made or they received bad advice from your company, they may make a claim or even sue your business.

Professional liability insurance helps cover common claims including negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. Depending on the terms, a professional liability insurance policy may also help cover privacy violations.

Having professional liability insurance can help protect you and your business from the time-consuming work and costly expenses that come with mounting a legal defense after a client sues.


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