Taking on customers or clients is a daunting prospect in the beginning, but it doesn’t take long for it to feel like ‘work as usual’. The trouble with that is, it’s easy to get complacent about your level of responsibility for every individual who walks through your door, whether they’re here for advice, a service, or a physical product like a cup of coffee.
You’ve no doubt encountered the terms ‘errors and omissions insurance’ and ‘general liability insurance’, but do you know the difference? And, perhaps more importantly, do you really know why you need them? Or if you even need them at all?
What is Errors and Omissions Insurance?
There’s one key question that errors and omissions insurance coverage addresses. Put simply, it’s there to respond to the question of "Did our advice, service, or work fall short?” In other words, in your role as an advisor or consultant, or perhaps a real estate agent, or anyone offering professional guidance or instruction to a client, did you fail to give clients the insights or information they need to make an informed decision
One example of this would be selling a house to a buyer who does not know that plans are in motion to erect a freeway right alongside their property boundary.
A lot of people make the mistake of thinking that E&O insurance is only for those offering professional advice, rather than a service. But designers, software developers, and architects are among those who provide a service to paying clients, and for whom E&O insurance is still necessary.
What is General Liability Insurance?
The question posed by general liability insurance is this: “Did we cause physical injury or property damage?”
The most obvious instance of general liability insurance is when a contractor drills through a wall and causes a pipe to burst, or a roofer drops equipment off the roof and harms someone walking underneath. However, it’s important not to make the mistake of thinking that only those performing manual labor or house visits need general liability insurance. People can still get hurt when visiting your office or storefront, or products you sell can still cause damage to a customers’ property after you have handed them their receipt.
A single claim against you due to injury or damage can be financially devastating, and general liability insurance is the only way to ensure you’re truly ready. A forgotten wet floor sign, a faulty electrical, or a simple trip hazard is all it takes to land you in serious trouble.
Which is More Important?
This is a chicken and egg question, since neither one comes before the other – and, by extension, neither one can replace the other. If you deal with the public (or other businesses and contractors) to any degree, then you need both if you’re going to function safely and without the constant, gnawing risk of being found legally responsible for something that you shouldn’t be considered responsible for.
Accidents can happen at any moment, just as mistakes can happen in the form of vague or misjudged advice, or a simple oversight.
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