Do I Need Errors and Omissions Insurance?
Insurance needs vary from business to business. Before you plunk down your cash, make sure you have to.
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Q: I want to start a smallhomebased business to supplement my retirement income. I am findingthe cost of errors and omissions (E&O) insurance is prohibitivefor homebased businesses (we got one quote of $2,000), but veryreasonable for larger, conventional businesses. Why can't Ifind E&O coverage at a reasonable rate?
A: Before you start shoppingfor E&O insurance, answer this question: How real is your needfor E&O insurance? Does the type of work you plan to do entailmuch potential for liability? If technology is involved-like beingresponsible for multimedia arrangements at sales presentations-thenwe would say yes. But some types of businesses allow you instead tocreate a client agreement that protects you, making the clientassume the risk. I would not do this without having an attorneyinvolved who can help you determine whether such a clause wouldscare away clients. If, on the other hand, contracts in yourindustry require E&O coverage, provide a warranty or guarantee,or have clauses that require you to indemnify or hold harmless yourclients, you need to start shopping.
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