Errors and omissions insurance

The fact is, you might earn a living off your expertise – but it could also put you in the crosshairs of a client lawsuit. Any business that provides advice or services should consider errors and omissions insurance.

Most tech businesses buy technology errors and omissions insurance (tech E&O). It includes cyber liability insurance to help pay costs from data breaches and cyber incidents at your business.

If a client blames your business for failing to prevent a data breach, tech E&O covers those costs as well. And legal expenses can be steep even if you win.

The good news is, tech E&O coverage is affordable. TechInsurance customers pay about $60 per month for this policy.

Unhappy customers are a fact of life in business. But when a customer claims your mistake or negligence cost them money, you may end up in court.

An E&O policy, also called professional liability insurance, protects your company from the high costs of a lawsuit. It covers:

• Legal defense costs
• Court-ordered judgments
• Settlements
• Court costs

Let’s say a customer hired an IT project manager to oversee the implementation of a new ERP system, but missed several project deadlines and the targeted completion date. The client filed suit, claiming this breach of contract caused them significant financial harm. An E&O insurance policy would pay for the project management firm’s legal fees and eventual court settlement.

Or imagine an IT consultant recommends a cloud storage service provider to a client, which turns out to be riddled with performance issues and lacks basic features like file sync and file sharing. The client sued the IT consultant to recover damages. E&O insurance would pay for legal costs and any judgment.

Read more about errors and omissions insurance coverage.

E&O insurance doesn't cover every risk. For instance, you may also need:

• General liability insurance for third-party bodily injury and property damage claims.
• Workers' compensation insurance for employee injuries.
• Employment practices liability insurance (EPLI) for employment disputes, like claims of harassment or discrimination.

Any company that provides a service to a client can be accused of inferior work or miss a deadline due to unexpected delays. If a client sues, the costs can do serious damage to your small business – whether or not you’re at fault.

That’s why E&O/professional liability insurance is crucial for technology and software businesses:

• IT consultants
• Software developers
• Cybersecurity
• Project managers
• Web designers

Bottom line, any small business owner that provides professional services could benefit from this policy. And that’s doubly true if your mistake could cause a client financial loss.

It’s tempting to drop your business insurance once you stop working for a client, get a full-time job, or retire, but for E&O that’s a big mistake. Errors and omissions insurance is a claims-made policy. That means you’re only covered if your insurance policy was active both when an incident happened and when the claim was filed.

For example, say an IT consultant buys E&O for coverage when helping a client try and win a big grant. The consultant lets the policy lapse after the client submits a grant application. Three months later, the grant is denied. If the client sues the consultant, the insurance company won’t help since the policy expired.

That’s why it’s crucial to keep this type of insurance active – even when you think you no longer need it.

Luckily, if you need coverage for past events, you have options. Ask your insurance company about setting a retroactive date for coverage when you apply.