YOU ASK:

What is the difference between E&O (errors and omissions) insurance and professional malpractice insurance?

WE ANSWER:

Errors and omissions insurance is no different from professional malpractice insurance. The errors and omissions insurance is the umbrella concept of the professional malpractice insurance.

  • For doctors, dentists, and other medical practitioners, this is called malpractice insurance.
  • For accountants, lawyers, engineers, architects and other skilled professions, this is called professional liability.

For instance, a stock broker can face a lawsuit regarding advice he provided to a client to buy a certain stock and that stock plummeted in value. Another example would be an architect who designed a faulty house which caved in and caused injury to the residents. Still another example would be an accountant who made a mistake in the client's tax returns and the client was slapped with a heavy fine.

Though terms and names may vary according to industry, this insurance still work the same - to cover you and your company if and whenever a client or customer holds you legally responsible for a service you should have provided or failed to provide, or anything which did not reach their expected results or outcome.

An error and omission insurance covers a wrongful act or mistake which can cause physical or financial harm to a person or company as a whole. Depending on the terms and conditions of the policy, the insurance will pay for:

  • Court defense costs.
  • Damage awarded to the complainant or an out-of-court settlement offer.
  • A daily allowance for every day you have to be in court.

The errors and omissions insurance help you from bearing the entire costs of defense for lawsuits and damage costs for lives or properties due to a mistake or negligence on your end.

Please note that Errors and Omissions or professional malpractice insurance is not supposed to replace business liability insurance.

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