As a small business owner, you’re no stranger to multitasking, and insurance might not always make it to the top of your to-do list. The good news is that you can protect your business from unexpected challenges with the right coverage while focusing on what you do best.
Errors & Omissions (E&O) insurance and cyber insurance are two essential tools for safeguarding your hard work and ensuring your business can thrive, even when the unexpected happens. But what exactly do they cover? And does E&O insurance include cyber liability?
Let’s take a closer look at the details of these two policies so you can make informed decisions about protecting your business with insurance.
Errors & Omissions insurance (also called professional liability insurance) is your safety net if your business provides professional advice or services. If a client claims you made a mistake, gave inaccurate advice, purposely misled them, or didn’t meet expectations, E&O insurance helps cover your legal costs, plaintiff settlements, and judgments against you.
Imagine you’re an accountant, and a small error on a tax return leads to penalties and financial loss for your client. Even though it was unintentional, your client could sue you to recover their losses. Without E&O insurance, you would be left to pay for legal fees and potential damages out of pocket.
If you’re thinking, “My business is too small for this kind of policy,” or “I don’t make enough money for anyone to sue me,” we understand why it might feel that way, but that’s not factually true. Small businesses get sued much more often and are more likely to get sued if they bring in less revenue, according to findings from a 2023 U.S. Chamber of Commerce study. One lawsuit can be enough to put any small business in serious financial trouble.
One small oversight or an unhappy client is all it takes, and small businesses are often more vulnerable because they don’t have the financial cushion to absorb high-cost incidents. With E&O insurance, you’re setting your business up to recover and move forward, no matter what happens.
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Consider this when buying your E&O insurance policy: you’re not just protecting your assets but your clients’ assets, too.
Imagine for a moment that you’re a financial advisor for high net worth individuals. Right now, your annual revenue might be $100,000, but you manage a client’s portfolio that is worth millions.
If you make an error that results in a significant financial loss for them or even give them well-intentioned advice that results in a loss, you could be held liable for perceived financial damages.
That’s what E&O insurance is for. It provides the coverage you need to handle the financial exposure of your clients, even if that exceeds your revenue or net worth.
Many small business owners underestimate this risk because they focus on what they stand to lose, not what their clients stand to lose. However, as a service provider or consultant, they aren’t separate if a day comes when a client decides you’ve been professionally negligent. Here’s the bottom line: if you provide a professional service that could impact someone else financially, you need E&O insurance.
Professional liablity insurance does not cover cyber liability – but they are both essential policies for service providers and consultants.
While E&O insurance protects you against claims of negligence, bad advice, or failure to deliver services, it does not cover you for the risks related to cybersecurity incidents.
Here are some of the cyber risks that you need to be aware of:
Other risks of cyber threats like ransomware, hacking, and data breaches include reputational damages, downtime, and profit loss. A comprehensive cyber policy can cover the downstream effects of a cyber incident, like reputational damages and profit loss. However, these risks all fall under cyber insurance, not E&O.
If you use a computer, you need cyber insurance. It doesn’t matter if you’re a freelancer, a small accounting firm, or a growing lawn care business. Cyberattacks are growing in frequency and sophistication, and anyone who uses technology in their business operations is at risk.
CoverHound Tip: While Tech E&O is tailored explicitly for jobs in the technology industry, many of which have a higher cybersecurity risk, it is not automatically bundled with cyber. Additionally, it does not cover cybersecurity risks. So, if you have a Tech E&O policy, you still need a cyber policy.
Think of E&O and cyber insurance as two sides of the same coin. They both protect your business, but in different ways:
Here’s how it breaks down:
Together, these policies provide comprehensive protection against the unexpected. Combining E&O and cyber insurance will prepare you to handle incidents with minimal downtime and lost revenue, safeguarding your business’s future.
Insurance is more than a monthly expense. It’s an investment in your business’s longevity. If you’re serious about protecting what you’ve built, the right coverage is essential.
At CoverHound, we make finding the protection you need simple and stress-free. Our all-in-one platform lets you compare quotes from over a dozen A-rated carriers, helping you secure fast, accurate coverage in less than 24 hours.
Whether you need E&O insurance, cyber insurance, or both, we’ll help you find the policy that fits your business and your budget.
Get your no-hassle quote from CoverHound today and start your coverage tomorrow.
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