Errors And Omissions Insurance Explained

Errors and Omissions (E&O) insurance is a liability product that protects professionals. The insurance covers true errors or mistakes that affect a third party; however, it does not cover intentional errors or poor judgment. Many professionals are required to obtain E&O insurance due to the high risk involved with a specific profession. For example, due to the risk involved with the financial industry, many accountants or stockbrokers should consider purchasing an E&O insurance policy. Several factors can affect the cost, benefits and weight of a policy and the business should be evaluated prior to considering the purchase.

Unfortunately, people make mistakes and when the mistake affects a client's financial standing, the client has a right to file a claim with the appropriate court. However groundless the action may seem, a client may sue a company if the expected or intended results did not arise due to an error or mistake. As a result, the cost of litigation alone can have a profound effect on a company's bottom line. For example, a stock broker can be sued by a client even if the client was aware of the risk involved with purchasing a particular stock. To further illustrate, a printer could be sued for inadvertently printing wedding invitations with the wrong date. So, E&O policies protect a business from claims by providing specific coverage.

E&O insurance protects a business from claims arising from services rendered and typically cover court fees and the amount of a claim up to the insurance contract price. In addition, a policy may cover settlements and the defense attorney's bill. As a result, this type of insurance can protect a small business from bankruptcy and protect the bottom line of a larger business. The insurance may also be required to participate in membership associations.

Some organizations require that professionals obtain E&O insurance. For example, the Financial Industry Regulatory Authority--the largest regulator of United States securities firms--requires that securities professionals obtain an E&O policy. Many other organizations and membership associations require their members obtain this insurance to remain in compliance with their programs.

E&O policies each have different standards, which require that purchasers read the contract closely. A policy for an attorney, a dentist and a photographer will have different inclusions. Some policies exclude punitive damages while others may include the defense attorney's bill in the total liability. As a result, the policy should be reviewed carefully to ensure it meets a business' or professional's exposures.

People make mistakes, which, unfortunately, can affect a third-parties financial standing. As a result, professionals and businesses alike obtain an E&O policy to compensate clients and protect the company's income. E&O policies range in pricing and contract terms and should be closely reviewed prior to purchase.

You have read the best review article categorized by ask an attorney and the title Errors And Omissions Insurance Explained. You can bookmark or spread this post by using this URL https://attorneysearchtips.blogspot.com/2012/05/errors-and-omissions-insurance-explained.html. Thank You!