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Why it is a bad idea to Cancel your Errors & Omissions Insurance policy

There is simply no denying that starting a business is both rewarding and risky. This is especially true when you are putting in your own time and money. This is why most small Ontario businesses will do everything within their power to ensure that they are protected for all foreseeable outcomes. Small business insurance is without a doubt one of the best ways to protect yourself.

Specifically, errors and omissions insurance. This type of policy is usually included with most small business insurance packages and it can protect your business in a number of ways. In fact, it will protect you in the event that a client claims that your work isn’t up to par. No one ever goes into business with the idea of failing or making mistakes, but it is sometimes unavoidable. This type of policy will not only protect you while you are on the job, but it can protect you long after a job is over. And, this is just one of the many reasons that it is always advisable to never omit E&O insurance from your small business insurance package.

Even if you don’t have plans of making mistakes or treating customers wrong it is always an excellent idea to hang onto this policy. Cutting off this coverage will not only put your business at risk, but it could put your entire financial future at risk as well.

Alternating Your Coverage

Errors and omissions insurance is a type of insurance that will protect you in the event that you make professional mistake or oversight. Even if you are not at fault and the client makes a claim, you will likely spend thousands of dollars in defense costs. This is where your Ontario Errors & Omissions insurance can help out. It will not only cover these defense fees, but it could potentially cover any settlements or judgments that you face.

As a small business owner in Ontario, it is safe to assume that you probably aren’t always busy. There might be times when you have work and when you don’t. There might even be times when you take on extra work of side gigs. To help save a little money, most small Ontario business owners will cut off their E&O insurance when times are slow. Maybe you just have one or two jobs a week and want to cut some insurance costs. This might seem logical and it could potentially save you some money.

However, you are also putting yourself, your employees, and your business at risk when you are doing this. This is because most E&O insurance policies are based on a claims-made basis. What does this mean? It means that if you don’t have E&O insurance at the time of the job, you aren’t going to be protected. Even if you later take out a policy, you and your business will not be protected if there are claims made on jobs where you weren’t legally covered.

In order for errors and omissions insurance to be effective, you must both have the policy when the alleged incidents occur and when the claim is filed. If both of these criteria are not met it will be you who has to pay out of pocket for any of the financial expenses that your business faces regarding this claim.

What About Changing Your E&O Policy?

In an ideal world, it would be advisable to always keep your E&O policy the same. Of course, you aren’t living in an ideal world. You are living in a messy business world where things can go from tumultuous to calm at the drop of a hat. It is more than safe to assume that you probably will change policies or providers at least once throughout your business career. You have already learned about the risks of going unprotected, but you can’t simply turn customers away just because you aren’t protected. Is there anything that you can do to protect your pass work while starting a new E&O policy?

Yes, luckily there are a number of things that you can do to protect yourself during the situations. First, you have the option of purchasing prior acts/ nose coverage policies. This policy will more than likely be available through your new provider and it will protect against past mistakes or work that has yet to be reported. Another type of coverage available is known as tail coverage.

Tail coverage is a guarantee that you will be able to report claims after your old policy has been disbanded. Tail coverage is more than important for any small Ontario business that is changing current providers or shutting down their business. Just keep in mind that these are just amongst some of the most popular coverage options available. These aren’t the only options available and it is always advisable to speak with your provider before or potential provider before making any major, rash insurance changes.

 

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