The insurance industry seems to have a language of its own. As a business owner, it is a tongue you need to speak. If you’re unclear about the definitions of concepts such as civil liability and errors and omissions, you might not get the coverage you need.
What is Civil Liability?
Civil liability comes into play if you are found liable to pay for compensation, loss or damages in a civil court because of the advice you gave or the services you provided. Professional civil liability insurance protects you and your staff in the event that this occurs.
For example, perhaps you are a financial planner who recommended an investment path to a customer that ultimately turned out to be a disastrously bad idea. This is where civil liability insurance can be an invaluable safety net.
What is Errors and Omissions Coverage?
If civil liability coverage is the quilt, errors and omissions insurance (also known as negligence coverage) is a few squares of that same blanket. In short, it covers less and, for that reason, is not as costly to purchase.
If you are in the business of providing products, services or advice to your customers, you own what is known as a duty of care to them. If you gave bad counsel or shoddy services, or manufactured and sold a product that caused injury that resulted in financial loss or harm to the client, you can be sued for negligence. Errors and omissions insurance can protect you in these specific cases.
Is Your Business at Risk?
Some businesses can get by without errors and omissions or civil liability coverage. Ask yourself if the kind of work you do contains an inherently high level of risk.
For instance, medical and legal professionals as well as IT specialists who are entrusted with clients’ health and technology should never go into operation without a good professional civil liability insurance policy. If your risk is lower but you still have the potential to be sued for mistakes or bad advice, obtaining an errors and omissions policy might be all you need.
The best way to determine your level of risk is to consult with your insurance agent. If you’re just starting out and don’t have one yet, do some careful research. Don’t sign up with the first agent you meet; take time to examine all of your options, consulting with an attorney and others in your line of work if you need extra advice.
Remember, the coverage you receive is only as customized and comprehensive as is the policy you purchase, so take your time. If the worst happens, you will thank yourself for being thorough in spite of all that confusing insurance language.