Why Error Insurance is Important If it's not obvious already, error insurance helps deal with getting sued as a professional business. The coverage works as a financial and legal barrier to fend of lawsuits for damages caused by a professional business. Since lawsuits on professional businesses can include damages for injuries to a client results from a bad service, the costs can be much, much higher than just the cost of a service contract. For instance, a customer relies on an architect to build a factory building. The architect makes a mistake and the cost during construction doubles over initial projections. The customer sues the architect for the unexpected expense plus attorney fees which can be millions of dollars more than just the service cost of the architect's services. Most professional businesses would be wiped out in bankruptcy in just one error lawsuit. Error insurance avoids this catastrophe by taking on the financial cost of defense and ultimately the damages rather than the business itself. Error insurance also beneficial for when no mistake is made but a claim is alleged anyways. Groundless lawsuits occur all the time, some with the intent of seeking a quick settlement payout for little effort. In fact, many lawyers for good cases and bad, push for settlements because they are sure way to get paid rather than taking the risk of a protracted trial and 50/50 court decision. Who Needs Errors and Omissions Insurance? Anybody in any kind of profession where a customer relies on a person's license or certification as proof of expertise needs this insurance. The benefit of having a professional license or certification also becomes a weakness for a business legally. Where a normal person would generally be held to an average person standard if they made a mistake (i.e. if it's common for everyone to do something wrong), the expert gets held to a higher standard. He can't hide behind common misconceptions or behavior. His proven expertise means he is expected to have performed what's called due diligence, or function extra carefully to avoid mistakes. As a result, lawyers, doctors, engineers, advisors and more all fall into this dangerous risk group. It's part of the cost of being able to get business, at a higher pay level as well, that can only be performed by someone with such a license or certification. The number of professions involved all generally tend to provide intellectual services or products. Whether it's real estate agreements or insurance policies, the insured business is expected to do the job correctly. Again, however, the definition of correct is more perception than fact. So error insurance helps protect the business from such claims, even when misguided by an unrelated outcome. The Importance of E&O