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10 Questions to Ask Your Agent about Your Errors and Omissions Policy

So how can you ensure that your Errors and Omissions policy is adequate for the risks your business currently faces? Call your insurance agent and ask these key questions:

1. Does my policy cover errors AND omissions? Be sure to read the fine print of your policy (or have your agent walk you through it). A policy with a lower premium may seem enticing, but reduced premiums often come with reduced coverage. Make sure that, if you decide to choose a cheaper policy, it doesn't exclude coverage for work you expect to do.

2. What does my policy exclude? Policies that list exclusions typically offer more coverage than those that name covered incidents. Get to know the kinds of events and incidents that your Errors and Omissions Insurance doesn't cover and update your policy if you start to offer services that might expose you to those risks.

3. Does my policy cover legal expenses? One major benefit of most Errors and Omissions policies is that they cover the legal costs (including lawyers' fees) associated with defending a business against a claim. You may find a cheaper E and O policy that provides no legal defense coverage, but it's probably not a wise investment. Legal bills are often the most expensive part of an E and O claim.

4. …but does it cover ALL of my legal expenses? To fully protect your business, make sure your defense coverage extends throughout the defense and appeals process. Otherwise, you could find yourself in the middle of court appeals with no legal representation – and no funds to pay for it.

5. Will my E&O policy provide me with a lawyer? Some policies provide legal counsel in the event of a lawsuit, which can save you the time and hassle of hunting down a lawyer who is both in your price range and familiar with handling E & O claims for small IT firms.

6. Is my insurer required to defend me against claims? Some E and O policies indicate that the insurer has the "right to defend" the insured, while others note that the insurer has the "right and duty" to defend. The "right and duty" clause offers you more protection, because it means your insurance provider is legally obligated to provide your defense if you're sued.

7. What is my policy limit? Most policies have two limits: a per-occurrence limit and an aggregate limit. The occurrence limit is the maximum your insurance provider will pay to reimburse you for any single claim. The aggregate is the maximum it will pay for all claims in a year.

8. Are my contractors covered under my policy? Many Errors & Omissions policies extend coverage to 1099 contractors working with your company. This type of coverage is important if you work with contractors, as your company could be held liable for anyone doing work on your behalf.

9. Will I be covered even if the claims against me are groundless? In most cases, your Errors and Omissions policy will cover you whether or not the claims against you are well-founded. Check with your insurance agent for details about your policy.

10. Will my E&O track record affect my insurance rates? Often, maintaining a clean lawsuit record and taking certain precautionary measures (such as implementing good contracts practices) can translate to lower E and O premium prices.

Next: What Isn't Covered by E&O Insurance?

70% of businesses raise prices or cut hiring when sued