Errors and Omissions Insurance vs. General Liability: Why IT Professionals Buy Both
If you’re like most small-business owners, you walk a fine line with your budget. You know there are things you need, but you also want to make sure that every expense is worth the money spent.
Take insurance. If you don't know what each policy does, answering that question becomes even trickier.
It may help to know that Errors and Omissions Insurance and General Liability Insurance are both types of liability insurance, but they protect your business in different ways. Let’s take a look at why so many IT professionals buy both.
What Is Liability Insurance?
Liability insurance is the kind of policy that can help pay for legal bills when you're sued over civil wrongs. But no single policy can address all the reasons a person might sue you or your business. As a result, insurance companies developed different policies to address different liabilities. That's why you often need more than one kind of liability coverage to protect your business.
What’s the Difference Between General Liability and Errors and Omissions Insurance?
Technology Errors and Omissions and General Liability Insurance differ in a couple key ways:
- General Liability Insurance covers lawsuits brought by third parties (i.e., anyone who isn’t an employee) who claim your business caused them bodily harm, property damage, or personal injury.
- Errors & Omissions Insurance (E&O Insurance) covers lawsuits brought by third parties who claim you were negligent in your professional duties.
As you can see, both cover risks associated with your relationships with third parties, including clients and business partners. The difference is in what triggers the policy. General Liability may cover lawsuits over:
- A deliveryperson’s slip-and-fall accident at your office.
- A client’s laptop stolen from your office.
- A competitor’s claim of copyright infringement.
On the other hand, E&O Insurance, sometimes called Professional Liability Insurance, is triggered when a client claims you…
- Lost their data.
- Failed to complete a project.
- Made mistakes in your code.
- Forgot to update their software.
- Breached a contract.
In short, General Liability can step in when general accidents happen on your watch, and E&O addresses work-specific claims.
Why Should I Carry General Liability and E&O Insurance for My IT Business?
Your business has risks that General Liability and Errors and Omissions can cover. If you choose one policy over the other, you leave your business vulnerable. In some cases, you may even risk your personal assets. That alone makes purchasing both coverages sensible.
You may also want to consider that…
- Some clients only contract with IT professionals who have both coverages.
- Landlords often require General Liability coverage in their leases.
- Technology E&O Insurance makes your business look financially stable.
Check out “How Errors & Omissions Insurance Can Help You Attract Bigger Clients” to learn how to leverage your coverage in your marketing.
How Much Does General Liability and E&O Insurance Cost?
Insurance policy prices depend on a variety of factors, such as the size of your business and the services you offer. However, many tech professionals can find E&O and General Liability for the combined annual premium of $1,300 to $1,900. That's approximately $108 to $160 per month.
If that seems steep, you may want to consider how much a lawsuit can cost. Both General Liability and E&O Insurance can cover…
- Lawyer fees.
- Investigation costs.
- Court-ordered judgements.
General Liability can often help pay for immediate medical expenses for the injured party, which can spare you a lawsuit altogether. Apply online to see how much your General Liability and E&O coverage may cost.