Even if your business is already established and is running smoothly, this is not a complete guarantee for your business not to face lawsuits. With just a perfect accusation plotted towards your company, everything you’ve worked for can be gone in an instant and you’ll be left with a ruined reputation and financial turmoil. This is the reason why Errors and Omission or E&O policy (also known as professional liability insurance) is in place.
You might ask if E&O is really necessary? Here is an insight. The National Association of Professional Agents says that at one point in their entire profession one out of seven businesses will have an E&O claim and the average expenditure to settle such claim amounts to roughly $16,000. As you decide whether or not to purchase an E&O policy, here are some central matters to consider.
It is your responsibility to read and review what is written in the declaration page and the terms written in your policy. You might end up still defending and mending costs just because it was overlooked or the policy was not clearly written or a specific coverage was missed. Make sure you are correctly and completely covered by reading through and understanding everything in your policy.
Remember that claims-made policies like E&O requires that claims should be done during the policy period following the retroactive date. Failure to do so can lead to rejection of getting the claim.
An E&O policy limit that tenders satisfactory defense cost during worst situations is the best choice to go for. It is important for the expense of the insurance to be balanced with the exposure.
Another important thing is to know what is ruled out in the policy and how this can directly affect your coverage. Possible exclusions may include damage or destruction to any physical property, preceding or pending lawsuit as of the start of the policy date, claims from any wrongful acts committed by the insured, illness, death of any person and body injuries.
Lastly, look into three important details: the policy premium, deductibles, and the financial strength of the policy provider. Delve into different policy providers’ history, reputation, standing and research for any history of complaints. One good way is to ask people who have previously partnered or worked with them. This is first hand information that can be very useful in your assessment and evaluation. ‘
Finally, it is imperative to also have your lawyer review and evaluate the policy they are offering. Professional opinions can be very helpful at this point.