As a freelance provider, it is important to make sure you have adequate business insurance coverage for errors and omissions — that is, for services you provide or fail to provide. Despite all precautions, making mistakes is still possible. It is for such mistakes that clients may file lawsuits against you. The cost of damages and/or litigation expenses could threaten your business. Errors and omissions insurance helps ensure you are fully protected.


Now that you have set up your business as a freelance provider, it may be a good business policy to review your business insurance coverage. Do you have adequate protection against all the risks of doing business?

One of the most important risks you face as a freelance provider involves errors and omissions. A freelance provider acts as a consultant, providing specialized knowledge and expertise to clients for a fee. But making mistakes in the course of doing your job is normal. We are all human, not always perfect.

If by making mistakes you cause damage and losses to clients, you may have a lawsuit on your hands. And, as the liable party, you may have to pay out substantial sums. Even if you put up a successful defense, the cost of litigation may run to thousands of dollars — money which could very well wipe out your small business.

You can protect businesses such as Internet provider services, Web hosting services, and all kinds of freelance provider services against errors and omissions exposure with a special type of insurance. You may have heard of professional liability insurance, which covers people of various professions such as law, architecture, and accounting. A similar business insurance policy, commonly known as malpractice insurance, is issued for those in the medical professions. For a freelance provider, insurers provide errors and omissions coverage. The principle of coverage is the same: you are fully protected for failures of performance on your part, which have resulted in financial losses to the client.

In some cases, the freelance provider covered against errors and omissions can use it to advantage in marketing his or her services. Clients may like the fact that they can have legal recourse in case something happens to their project with you. Indeed, there are clients out there who require their freelance provider to have this type of business insurance.

For example, an Internet provider is bound to deliver Internet services at all times agreed upon. A failure by the Internet provider to fulfill the contracted services may cause damage to the client, such as loss of valuable data, system failure, etc, or render client unable to continue operations. The Internet provider would be the liable party in a lawsuit. It therefore makes sense for the provider to buy Internet business coverage. This Internet business policy should cover performance areas detailed in the contract and fits all your errors and omissions exposures.

The period of coverage is crucial. You need to be aware that errors and omissions insurance are based on “claims made” or “claims made and reported” — in other words, lawsuits — during the life of the policy. But, it is possible the client may file the lawsuit only years after the actual event for which client is claiming damages occurred. It is therefore risky to let your errors and omissions policy lapse.

The policy governing the business insurance you purchase will be customized to fit your needs. A standard policy cannot be written, because your business transactions as a freelance provider are unique. Make sure you get the coverage you need.