Errors and omissions insurance protects business professionals whose clients could claim damages as a result of the business professional’s faulty performance.
The faulty performance may be because of a neglient act, error, or omission by the professional; hence, the name of the insurance.
Errors and omissions insurance protects the business professional by shielding his or her assets and paying for his or her defense if a client makes a claim. It protects the professional’s clients by ensuring that there will be adequate funds to pay for damages incurred if the professional’s services are deemed to be faulty.
In some provinces such as Ontario, Quebec and Saskatchewan, errors and omissions insurance is mandatory for professionals such as Estate Planners and Financial Consultants. If you provide professional services that involve getting paid for advice, you should check to see whether or not provincial legislation requires you to carry errors and omissions insurance.
Other types of business professionals who might need errors and omissions insurance include computer consultants, software developers, planners, architects, accountants… In other words, if your clients might sue you for damages resulting from faulty performance of your services, you should consider carrying errors and omissions insurance.