Your clients are counting on your expertise to keep their systems running so they can keep the revenue coming and business growing. Without the technology they count on, most businesses would quickly falter. That's why it's so important for technology services providers to carry professional liability insurance to protect their businesses in case something unexpected happens.
This type of insurance – also called E&O; or errors and omissions coverage – protects your business against the high costs associated with claims that your business is negligent in providing your professional services.
What an E&O Policy Covers
Suppose you're responsible for establishing a backup system for your client's customer account information. Due to a technical problem the automatic backups you scheduled never happen, and several weeks' worth of data are lost before the problem is discovered. Or, you've been hired to develop a new order entry system for a client and a coding error corrupts the data. Your customer suddenly faces potential lost income as well as the cost of rebuilding their customer database.
If your client sues you for causing them a financial loss – whether those accusations are justified or unfounded – this coverage helps to pay for your legal defense, judgments, or settlements you may be required to pay to compensate your client. It also typically includes coverage for your income lost while you're fighting your case in court as well as certain other expenses you may incur.
It's important to know that this type of policy operates on a "claims made" basis. This means that for a mistake to be covered, the alleged error must have occurred and the claim filed while the policy was in force. So, to ensure the most complete protection, it's smart to continue your coverage even after your client project is complete.
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Top comments (1)
Good post! Nowadays all companies and business must have specific insurance. Talking about professional liability insurance, it is more suitable for professionals such as accountants, lawyers, and physicians against negligence and other claims initiated by their clients. But if you want to start your own business, you should get general liability insure policy. It will provide much more better protection.