Running and owning a business comes with a lot of responsibilities. You need to manage your staff, make networking connections, talk to clients, and do seemingly a million other things to keep the business going.
One of your top priorities should always be protecting your business from anything that could happen. That means making sure that you have insurance coverage for any risks you might have.
Most businesses have liability insurance and property insurance. However, certain types of businesses need to have errors and omissions insurance. As opposed to physical injury and damage, e&o insurance will protect you from the consequences of causing a loss to your client because of an error.
What is Errors and Omissions Coverage?
Try as you might, you are not perfect. Nor are your employees. You might be the very best at what you do, but that doesn’t mean that you won’t make mistakes from time to time.
For the most part, mistakes can be fixed and there is no further issue. However, there may come a time when you or a team member makes a mistake that causes a client to suffer a loss.
Here is an example: you are an electrician, and you are hired to upgrade the electrical system and install new fixtures in a ballroom. You agree that you will complete the work by a specific date because the ballroom is hosting a very lucrative event shortly after.
During the install, though, you realize that you have used the wrong materials, and must backtrack. The delay causes you to miss your deadline, meaning that the venue has to cancel the event and issue refunds. They may then decide to take legal action against you to recover the revenue that they missed out on.
Errors and omissions coverage will protect you from the consequences of that legal action. It can provide compensation for your lawyer fees, court fees, legal expenses, witness, and any damages awarded against you. Essentially, it’s to protect you from yourself.
Why your business needs errors and omissions coverage
1. You Are a Service-Based Business
E&O insurance isn’t necessary for every business. If you run a retail company, then you are probably safe to not have it.
But if you provide any kind of service or consulting business, then you should have protection.
If you are a financial planner and a client feels like your advice led to financial losses, then you will want to have that coverage. In fact, it is mandatory in some states for financial services to have e&o to protect everyone involved.
Even a business such as a salon and spa should have it. You can find yourself facing a lawsuit if you damage someone’s hair or their skin.
2. Financial Stability
There is a chance that you will never need to use e&o insurance during your entire lifetime. That would definitely be a good thing.
But just because you don’t use it does not mean that it is not valuable. You will pay on a monthly or yearly basis for your errors and omissions coverage. You can have that as part of your budget and never have to think about it.
When you don’t have the coverage and you face a lawsuit, you could find yourself in deep financial difficulty. E&O will ensure that your finances are stable, and you won’t be sunk by unexpected costs related to a lawsuit.
3. Less Stress
Running a business probably comes with a lot of stress about a lot of things. Why add to that?
If you leave yourself unprotected, you will worry every time you or an employee are out on a job. You may not even be able to sleep at night knowing that you are a simple mistake away from potentially losing your business or being flat broke.
An investment in insurance coverage is an investment in your peace of mind. You can be confident in the advice and service you give, because even if you make a misstep you will still be protected.
4. Preserving Your Assets
Fighting a lawsuit, even a minor one, can be expensive. First you have to pay for your attorneys. You may also have to pay for witnesses or other evidence to be produced and presented.
There may be court fees involved as well. At the end of it, you might have to pay damages to your accuser. All of these costs add up, and could leave you in dire straits.
Being in financial difficulty will not make you exempt from having to pay out. You will still need to make good on those awards and legal bills.
If you do not have errors and omissions coverage, you will have to pay out of your business assets. If you don’t have enough to cover, then you may have to dip into your personal assets as well.
In the end, you and your business may be left bankrupt.
5. Protect Your Clients
As a service provider, it is part of your responsibility to make sure that you are trustworthy and honest with your clients. They want to know that you are professional and reliable, and that you will make good on your commitments.
If something happens that you have to break a contract or that you cost them financially, you should want to make sure that they are protected as well as you.
If you don’t have enough to provide them with compensation, your coverage will. Clients will be more likely to work with you if they know that no matter what happens they will be financially protected.
Everybody makes mistakes. They are inevitable, no matter how good you are at what you do.
Plus, even if you are perfect, you may end up with a client down the road that thinks you made a costly mistake, and takes you to court for it. If that happens, you do not want to end up losing your business or taking a massive financial hit.
Errors and omissions coverage will make sure that you and your business are protected.