What you need to know about E&O insurance

In this time of economic, political and social instability, any professional or entrepreneur should be making errors and omission (E&O) insurance a top priority in their financial portfolio under their professional liability plan.

Protect Your Practice With E&O Insurance

“It is necessary to protect your professional practice, and it protects you against any error or omission with your business,” said Patrick Perlas, president and chief executive officer of Las Vegas-based Perlas Insurance. “To obtain many contracts or group clients you need E&O insurance, so it really becomes a must have.”

How to Find the Perfect Plan Right for You

There are several ways to identify an E&O plan, from contacting an agent, to specific websites for plan selection. Other websites offer ratings plans where they review basic business operations and functions, and then offering pricing for review with plans that can be implemented immediately.

“If a practice gets too complicated or you hit certain revenue thresholds, you are going to have an immediate need for more stringent underwriting, so basic online forms will not be enough,” said Perlas. “You will need to fill out a more comprehensive form that caters to your separate needs and see who offers the best rates from there. Once your revenue hits in the $300,000 to $400,000 range, you will need to start accessing the long form.”

Perlas said new plan purchasers should concentrate more on coverage type and making sure it is the proper coverage, from $1 million, $2 million, $3 million or a different amount.

“First, try to look at the limits, and the complete terms and conditions of the policy, know exactly what you are covered for,” Perlas said. “You want a broad policy with blanket coverage, and make sure all staff are intentionally covered, and know if that policy changes by staff member. You can scale your policies, which is especially nice if you have a large administrative staff.”

As with any plan, deductibles are important, and another cost to consider if you are being sued outside of the plan´s limits. Often the cost of paying lawyers is separate from the $1 million policy. The length of prior acts covered is another important plan component.

“Length of prior acts is often overlooked, or underestimated,” Perlas said. “This is when you want to take a close look at your operations and those that manage your personnel, properties and processes.”