Errors and Omissions insurance (E&O) is a type of professional liability insurance that protects businesses and its workers against claims for negligence or inadequate work. This coverage is suggested for businesses that provide professional services such as a consultant.
E&O will often cover both court and settlement costs related to a suit. This does not protect against someone’s claim of injury or damaged property, this is covered under your General Liability policy.
The Hanover’s Professional Liability Risk Report shows that “1 in 5 professional service providers do not have E&O insurance.” 26% of professional service providers don’t think they need E&O and 24% were unaware of it entirely.
Regardless of your reasoning not to have E&O, the risk of a lawsuit is always present. A claim may arise from an employee error or even from a third-party source. For example, if your companies’ computers are hacked and valuable client information is stolen, this could bring on a lawsuit. Without E&O, the cost of legal fees and settlements, as well as possible lost income, can be a huge threat to your business. No matter what size your business is, E&O could keep your business safe.