Which Companies Need E&O Insurance?
Managing Risk as a Business Owner
Most business owners understand the importance of managing the risk their company takes on. Understanding when to take risks or play it safe is often the difference between being a successful business owner or one who ultimately fails.
One situation in which it is never a good idea to take risk is when deciding whether or not to acquire insurance. For businesses that provide a paid service to customers, having E&O insurance is simply mandatory. E&O insurance, otherwise known as Errors and Omissions insurance, protects businesses from occasions in which they make a mistake that causes harm, financial or otherwise, to their clients.
What Industries Need E&O Insurance?
According to a study conducted by executives at London based broker R.K. Harrison, the cost for E&O insurance has risen dramatically since the 2008 financial crisis. With the collapse of financial giants like Bear Sterns and Goldman Sachs, there has been a trickle down of losses throughout the financial sector, which has yet to recover. Rates for E&O insurance have risen between 10% and 15% annually for financial institutions.
Yes, even insurance companies need to be covered by Errors and Omissions Insurance! As an industry that can be responsible for financial obligations reaching in the millions of dollars, being protected from accidents and mistakes can save untold sums of money that an insurance company could be liable for without E&O insurance. There was recently a lawsuit in which Excalibur Reinsurance Corp. was sued by Travelers Insurance Co. for failing to pay out $675,000 in Errors and Omissions. If Travelers Insurance Co. did not have E&O insurance, they would not have been able to claim the $675,000 owed to them by Excalibur Reinsurance Corp.
Sole Proprietors and other freelancers will sometimes need E&O insurance as well. Depending on the specific industry and the types of clients each individual has, E&O insurance can range from a prudent decision to a requirement for certain clients before they are willing to proceed.Todd Adkins of Born to Design frequently lost business due to concern from clients that he and they were not protected in the event of a mistake on his part. After adding an E&O policy to his existing insurance policy, Todd found a dramatic increase in the number of companies willing to hire him.
If you would like to get more information about insurance agent errors and omissions insurance, or see if there is a better policy than the one you currently have, be sure to call Insurance By Design at 866-840-8004 and ask about our E&O umbrella programs.