Insurance is meant for the protection of an individual or a company from any kind of calamity. The type of insurance availed for one’s need depends greatly on the kind of need. Some examples of need-based insurances are – medical malpractice, professional indemnity insurance, also known as errors and omissions insurance, as well as kidnap and ransom (K&R) insurance. Professional Indemnity Insurance is one of the most commonly availed insurances.
Errors and omissions insurance (E&O) and professional indemnity insurance are synonymous and is availed by companies and their employees or individuals to protect themselves against claims made by clients for any negligence or inadequacy in the service provided. In case of any legal dispute, this errors and omissions insurance also covers court cost and any other cost that may be covered by the insurance.
Financial professionals like financial planners and insurance agents often obtain the errors and omissions insurance. Financial Industry Regulatory Authority (FINRA) and other regulatory bodies are often in need of the E&O insurance. The benefits given by the errors and omissions insurance depends on the type of insurance availed and the coverage provided. E&O insurance often does not cover temporary employees or employees on probation.
Scope of Errors and Omissions Insurance:
In the financial sector, lawsuits are filed for the smallest reasons. Clients often sue financial advisors if the investment does not reap the expected benefit, even if the risks are known from the beginning. At times, even if the court passes a decision in favor of the investor, the cost incurred in the legal proceeding is very high. For such situations, E&O insurance comes handy. Example of such a situation would be – companies may use the servers hosted by one company for using the data. There might be a situation where hackers get access to these servers and the confidential data of the companies using these servers is hacked. Often, the companies sue that company who is hosting these servers. In such a situation, all one needs is a good errors and omissions insurance. The insurance company pays for the financial loss caused by the court case.
In the commercial sector, the errors and omissions insurance is a much-needed savior that can save companies and individuals from financial damage, bankruptcy and any kind of sudden financial needs. Thus, professional indemnity insurance is a safeguard that is much needed and availed for in the commercial sector.