Errors and omissions vs. general liability: Why 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 tech business.
What’s the difference between general liability and errors and omissions insurance?
Technology errors and omissions insurance and general liability insurance differ in a couple of key ways:
- General liability insurance covers lawsuits brought by third parties (anyone who isn’t an employee) who claim your business caused them bodily harm, property damage, or another personal injury.
- Errors and omissions insurance (E&O) 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 can cover lawsuits over:
- A delivery person’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?
Every tech business has risks that general liability and errors and omissions insurance 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 types of coverage worthwhile.
You may also want to consider that:
- Some clients only contract with IT professionals who have both policies.
- Landlords often require general liability coverage in their leases.
- Technology E&O insurance makes your business look financially stable.
How much do general liability and E&O cost?
Insurance policy prices depend on several factors, such as the size of your business and the services you offer. The median annual premium for the two policies combined is $1,068 for tech professionals. That's approximately $90 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:
- Attorney's fees
- Investigation costs
- Court-ordered judgments
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 might cost.
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