To find new clients, you've probably already…
- Created a website for your business.
- Ordered business cards.
- Asked friends and family members for referrals.
But the right technology insurance policies can help you attract clients, too. Customers often want to see proof of Errors & Omissions Insurance, also known as E&O Insurance, before they work with you. Let's find out why.
1. It Shows Clients You Can Be Trusted
If you're just starting out, it can be a struggle to project a professional image – even if your work is on point. If your office is a corner of your dining room table, it might be difficult to convince clients to take you seriously.
That's where E&O Insurance can come in handy. Letting potential clients know that you have E&O coverage projects an air of professionalism. It shows clients that you take your business seriously and you're serious about protecting their interests, too.
In fact, many clients won't even consider hiring you for a job unless you can show they them that you have this coverage. That's because…
2. It Lets Clients Know if You Don't Deliver as Promised, They're Covered
IT Errors & Omissions provides coverage for your business if a client accuses you of…
- Making a mistake.
- Being late on a project.
- Delivering work that is incorrect or incomplete.
If a client knows that you have E&O coverage, they can breathe a little easier. If a project isn't completed as promised, your client knows they can at least get their money back.
Let's say a client offers you a job designing an app. Even though you have limited experience creating apps, you take the gig, figuring, "How hard can it be?" Turns out: very hard. You try your best, but deliver the app about six weeks late and full of bugs. Ticked off, and rightfully so, your client sues – knowing that your E&O coverage may be able to reimburse them for their lost time and money.
Of course, E&O Insurance can protect you, too. Let's say your client is awarded $100,000 in damages over the botched app, plus you're ordered to pay all court fees. Without E&O coverage, your business must cough up all that cash on its own. Even worse, if you're a sole proprietor, your assets are in jeopardy because there is no separation between your personal assets and those of your business. But if you have E&O Insurance, it should be able to pay for your legal fees and the cost of the settlement.
For more on how your business structure impacts your personal assets, read "Sole Proprietor, LLC, or S Corp: Which Structure Is Right for Your IT Business?"
3. It Keeps You in Business So You Can Take on More Clients
Business, just like life, isn't always fair. So even if you do your best to play by the rules and do everything right, you can still be sued.
That means a client can sue you for any reason. Perhaps they…
- Are trying to get out of paying a bill by claiming you messed up.
- Genuinely think you screwed up, even though you know you didn't.
- Can't be satisfied.
Even if you feel confident that you'll win the lawsuit, you would still have to pay the costs upfront to hire a lawyer to defend your business in court. You might also get saddled with other expenses, such as…
- Court fees.
- Expert witness fees.
- Extra junk food to stress-eat while the case drags on.
However, if you have E&O Insurance, you just need to call your insurance company. From that point, they should assign you a lawyer to manage your case. Your insurer can usually pay for lawyer fees and court costs. You're on your own for that junk food bill, though.
While E&O Insurance helps IT business owners, it's best to prevent lawsuits when you can. Read "5 Ways Technology Consultants Can Manage Their E&O Exposure" for tips on how to manage your risk and hopefully avoid being sued in the first place.