Read our complete guide to find out everything you need to know about errors and omissions insurance for your contracting business.
- What is errors and omissions insurance?
- What does errors and omissions insurance cover?
- How much does errors and omissions insurance cost?
- How much errors and omissions insurance do I need?
- How do I get errors and omissions insurance?
What is errors and omissions insurance?
Contractors errors and omissions insurance (Contractors E&O) is a type of liability insurance for trade contractors such as a plumbers, electricians, HVAC contractors, painters, carpenters, and others. Contractors E&O protects the value of the work that you do if it is damaged due to unintentional faulty workmanship. Your commercial general liability policy will protect you from damages that your work causes to other property, but your company’s work is excluded from commercial general liability coverage.
Example: Your electrician business completes an electrical wiring job for a large building. The cost of the job, including materials, is $20,000. Several months after you complete the job, a mistake in wiring causes a fire in the electrical box that severely damages the building and destroys your electrical work. The damage to the building would be covered by your commercial general liability policy, but the damage to your electrical work is excluded. If your company had Contractors E&O coverage, the additional $20,000 loss to your company’s work would also be covered.
What does errors and omissions insurance cover?
Contractors E&O only covers damage to your work, product, or impaired property that occurs after the job is complete and that results from your negligence, errors, or omissions. In the event that your company is held liable, E&O would cover the cost to repair or redo faulty work, as well as any legal defense against those claims. Work done by subcontractors is not covered, so only work that your company does is covered. Importantly, Contractors E&O is distinct from professional liability insurance, which covers errors in design or advising.
How much does errors and omissions insurance cost?
The cost of errors and omissions insurance depends on a number of factors, including the type of business you run, your industry, and coverage limits. While the range of pricing can vary widely, most small business owners can expect to pay annual premiums between $400 and $1,000.
How much errors and omissions insurance do I need?
For most small businesses, a $1 million per occurrence and $1 million aggregate limit in errors and omissions insurance is appropriate, but this is highly dependent upon your industry and the risks your business faces.
How do I get errors and omissions insurance?
There are many factors to consider when purchasing errors and omissions insurance—from the financial strength of an insurer to the pricing that you’re offered. Errors and omissions insurance is a fairly custom product, as coverage and risks differ from business to business, so it is particularly important to select an insurance provider that can build custom coverage to fit your specific business needs.
When selecting an insurance company, there are three main factors you should look at:
- The financial strength of the insurer
- Reputation for customer service
» Learn more about how to get errors and omissions insurance