How Much Would Errors and Omissions Cost A Small Business in New Mexico?

Errors and omissions insurance is a specialized liability insurance that offers coverage typically not taken into account by conventional liability insurance. It safeguards your business from legal claims if a customer files a lawsuit for negligence, errors, or omissions committed during business operations that caused a financial loss.

Errors and omissions insurance covers businesses against the full expenses of a claim made by a customer. It takes into account both court costs and the settlements up to the amount mentioned in the insurance contract. 



Coverage

The coverage of an errors and omissions insurance policy includes:

Work Mistakes 

An oversight or a minor professional error can result in financial loss to your customer. If they try to recover the amount by filing a lawsuit against your business, an errors and omissions policy can cover your legal costs. 

For instance, a real estate agent incorrectly lists an apartment’s area as more than it really is. The client realizes the mistake only after buying the home. The errors and omissions policy of the real estate agent will take into account the cost of hiring an attorney as well as the final judgment.

Undelivered Services

Your customer’s business plans may get interrupted if your company happens to leave the work incomplete. If you don’t succeed in delivering what you had claimed, a client can file a lawsuit against your business. 

For example, an insurance agent is unable to secure proper commercial auto insurance coverage for a customer. The customer then meets with an accident and figures out that they are not insured. In this case, they may sue the insurance provider.

Negligence

There are some minimum industry standards that a business is required to meet. If your company fails to perform up to the mark, a client may sue for negligence. Remember that even a dissatisfied client can file a lawsuit based on negligence, even if there is no apparent mistake in your work.

For instance, a customer hires the services of a network security firm. However, a data breach reveals the names and credit card information of hundreds of customers. The client files a lawsuit against the firm as they believe it failed to protect their data.

Missed Deadlines

If your business fails to deliver within the deadline, your client’s business plans may get delayed and cause a loss in revenue. If your client files a lawsuit against your business due to late work, this insurance policy will cover the legal expenses. 

For example, a tax preparer is unable to file a client’s tax return due to which the client has to pay a hefty fine. In order to recover the amount, the client sues the tax preparer. 

What’s Not Covered By Errors and Omissions Insurance

Errors and omissions coverage takes into account multiple scenarios. However, here is what it would not cover:

Bodily Injury or Property Damage

Errors and omissions insurance does not provide cover if a customer gets injured on business premises or you end up damaging their property. For such a situation, general liability insurance can cover the costs of property damage or bodily harm.

Employee Injuries

In case of a work-related illness or injury, an errors or omissions policy would not suffice. Workers’ compensation insurance would take into account the medical costs, along with part of the lost wages in such a situation.

Damage To Business Property

If your business property gets destroyed, damaged, lost, or stolen, you need a different insurance policy to provide compensation. A business owner’s policy is suitable for the repair and replacement of the affected items in this case.

Employee Discrimination Lawsuits

If an employee or job candidate files a lawsuit against your business for discrimination, harassment, or wrongful termination, then an employee practices liability insurance can help. It takes into account the costs of judgment or settlements.

How Much Does Errors and Omissions Insurance Cost?

The cost of errors and omissions insurance policy for a small business can depend upon several factors.

• Business size: The higher the number of employees, the higher your risks.

• Revenue: More revenue usually increases the risk of lawsuit.

• Industry: The type of industry in which your business operates can have an impact on the cost of errors and omissions insurance.

• Employee training: Teaching your employees to lower risks can have an impact on insurance costs.

• Contracts: Contracts can raise or lower your exposure to liability.

• Location: Some states have higher minimum coverage requirements, influencing the costs of errors and omissions insurance.

• Claims history: If your business has a history of lawsuits, the price of errors and omissions insurance policy may be higher for your company.

• Coverage limits: Insurance policies with a higher limit are bound to cost more than those with lower coverage limits.

The average price of errors and omissions insurance varies between $500 – $1000 per employee. For instance, if your company has 50 workers, your errors and omissions premium may be between $25,000 – $50,000 a year. 

You may put loads of energy and focus into your business, but nothing would completely eliminate the chance of mistakes. Errors and omissions insurance policy is vital for shielding your company from lawsuits. 

These lawsuits are those that claim your business made a mistake or omission when it comes to your products or services. While the cost of errors and omissions policy may change from one company to another, it is not a heavy price to pay for protecting your business.

Want to speak with an E&O insurance specialist today? Speak with a New Mexico Commercial Insurance specialist today at Elemental Risk Management.