As we’ve mentioned on this blog before, Errors and Omissions (E&O) Insurance is often more important for small technology companies than others. But knowing you need E&O coverage and securing an E & O policy that’s up to protecting you against the risks your work exposes you to are two different things.
In our conversations with owners of tech firms, we’ve found that there are several points of confusion about how E & O Insurance works “in the wild,” so to speak, and how owners of tech companies can be sure they’ve secured enough protection for their professional needs. Here’s a guide that answers the questions we hear most often.
Do I Need New E & O Insurance for Every Client?
The short answer is no: most tech companies won’t need to secure a new Errors & Omissions policy every time they land a new client. But there are some caveats to consider…
- Make sure your E & O Insurance limits are up-to-date. If you’ve recently expanded your offerings or started serving larger clients, you may need to make sure your E&O policy has coverage limits adequate to handle the risks you face. If you’re not sure whether your existing coverage is sufficient, a quick call to your agent should tell you for sure.
- Understand how “claims made” E&O coverage works. If you do need to update your Errors & Omissions policy, it’s best to do so sooner rather than later. That’s because E&O Insurance works on a “claims made” basis: in order for you to enjoy coverage under your policy, you must have coverage in place both when you perform the challenged work and when the lawsuit or challenge is submitted. In other words, if you’re starting to take on clients who expose you to greater risk levels, now is the time to increase your E & O Insurance limits.
When Do I Need E&O Insurance?
Finding an Errors and Omissions policy should be one of the first things owners of small technology firms do after registering their businesses. As a service provider, the work you do mostly consists of the advice you give. If your guidance should ever result in financial loss for one of your clients, you could face significant lawsuit-related expenses, should that client decide to sue for losses.
Having E&O Insurance in place from the start will allow you to avoid dipping into your personal or business assets to cover those expenses so you can continue devoting your time, money, and energy to serving your clients and growing your business.