Errors and omissions vs. general liability insurance
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 covers the costs of civil lawsuits, but no single policy addresses all the reasons someone might sue you or your business. Different liability policies address different types of liabilities. That's why you often need more than one kind of liability coverage to protect your tech business.
Errors and omissions vs. general liability insurance
Errors and omissions and general liability insurance each protect you from third-party lawsuits. The difference is what triggers the policy.
Errors and omissions insurance (E&O), sometimes called professional liability insurance, covers lawsuits brought by third parties (anyone who isn't an employee) who claim you were negligent in your professional duties. It can protect your business if a client claims that you or your employee:
- Lost their data
- Failed to complete a project
- Made mistakes in your code
- Forgot to update their software
- Breached a contract
General liability insurance covers lawsuits brought by third parties who claim your business caused them bodily harm, property damage, or other personal injury. General liability can cover lawsuits concerning:
- A slip-and-fall accident at your office
- A client’s property stolen from your office
- A competitor’s claim of copyright infringement
A general liability policy is especially important for tech companies with a commercial location, rather than a home-based business, since it protects against risks when a third party enters the office.
Why should my business carry both liability policies?
A costly liability lawsuit can put your business assets. and sometimes even your personal assets, on the line. If you choose just one policy, you leave your business at risk. With both E&O and general liability insurance in place, your business is better protected.
Why carry errors and omissions insurance?
E&O insurance is often combined with cyber liability insurance for tech businesses. This bundle benefits a wide range of IT businesses regardless of size or services, since any tech business can end up making a work mistake that leads to legal action from a client.
Clients will often ask for proof that your business has errors and omissions insurance before they agree to hire you. This policy shows you’re able to compensate clients if someone at your business makes a professional error.
Why carry general liability insurance?
General liability insurance covers the cost of third-party property damage and compensates clients or visitors who are injured on your commercial property.
If you rent your office space, your landlord may require that you carry general liability insurance. If you own the office space, it can protect your assets.
General liability coverage will often help pay the immediate medical expenses of a person who is injured at your business location, which can help you avoid a lawsuit altogether.
To save money on insurance for your office, purchase a business owner’s policy that includes both commercial property and general liability insurance.
How much does business liability insurance cost?
The cost of E&O and general liability insurance for tech professionals depends on several factors, including your claims history and your policy limits. These policies are usually reasonably priced. The median premium for both policies combined is $89 per month, or $1,068 annually.
If you’re sued, these policies cover the cost of:
- Attorney's fees
- Court fees
- Court-ordered judgments
- Settlements
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