What is the main purpose of errors and omissions insurance?

The main purpose of errors and omissions insurance, often referred to as professional liability insurance, is to protect professionals from claims of inadequate or negligent work. This type of insurance is particularly crucial for service-oriented professions, where errors in judgment or procedure can lead to significant financial losses for clients based on mistakes or oversights.

By focusing on the coverage of costs associated with billing errors, this option highlights one of the practical applications of errors and omissions insurance. For example, if a professional accidentally bills a client incorrectly or fails to identify crucial aspects of a service that lead to financial repercussions for the client, this insurance can cover the costs associated with said errors.

This financial protection is vital for maintaining the trust between clients and service providers, ensuring that professionals can continue to operate smoothly without the looming fear of litigation from inadvertent mistakes. Other options discuss elements that are not directly addressed by errors and omissions insurance, such as intentional misconduct, prompt payments, or satisfaction, which fall outside the primary realm of risk coverage that this type of insurance provides.