Errors and omission insurance is a type of insurance that protects an individual from lawsuit claims. This type of insurance is essential for service companies. Any individual who offers services, advices and financial assistance need to protect themselves from lawsuits which can be filled when a customer claims that he has received physical or personal harm, or financial, or property loss as a result of a mistake made by a business professional.
Errors and omission insurance is mandatory for some professional and service companies. It protects the service companies against lawsuits and it can pays for legal expenses. Most of the time legal expenses are very high and when a legal claim is filed on the company the company can loose it’s reputation.
There are many types of errors and omission insurances designed according to the profession of the company and profession of the person, like doctors, lawyers, real estates, financial advisers, tax planners and other professionals.
For hospitals and doctors: It is essential for doctors and hospital management to protect themselves against lawsuits. Which are filled by their patients. If a patient gets injured or dies due to the reckless treatment of a doctor or nurse, they can get a legal claim for their negligence. To protect themselves from such type of legal claims they need errors and omission insurance. This insurance provides the medical and hospital expenses for the injured patient to recover his health. If death occurs, then the insurance company pays some lump sum(death benefits) amount to the dependents of the patient.
For financial adviser or financial assistance companies: It is useful for the financial adviser companies to protect their business from legal cases and to protect the company’s goodwill. If a financial company is providing some advise to other businesses, such as, manufacturing, services,marketing, etc. and due to the negligence of one of the team members, the customer of the company receives a wrong advise and that causes a huge financial loss for the customer, then he files a legal claim on the advising company. As because of their wrong advise customer has lost huge amount. In order to protect themselves from these type of legal cases, the financial assistance providing companies need errors and omission insurance. If the company has E&O insurance, the insurance company pays the lost amount to the customer and protects the insured company from legal case as well as from loosing good will.
The above are the benefits of errors and omission insurance for service companies.