You're starting your own business or service and have already invested a lot of money. The possibility of having to pay errors and omissions, or E&O, insurance premiums doesn't look attractive at the moment and you're wondering if you really need it.

For starters, there is no blanket requirement for E&O insurance across all businesses and consultancies. However, there are many businesses and professionals who wouldn't think of doing business without it. In many fields, such as legal, medical and even information technology, the risk of lawsuits are significant. Although getting sued by a client doesn't happen every day or may not happen at all for some individuals or firms, the consequences of a lawsuit can be expensive and may even result in financial ruin.

When assessing your need for E&O insurance, there are some factors to consider.

• Can an error on your part cause a large financial loss for your client? An example of this is someone providing marketing advice to a company that wants to land an important client. Will an oversight on your part possibly cause injury or death? A rock climbing instructor or the owner of a rock climbing gym has this type of risk.
  
  
• What is the frequency of claims filed in your industry? When researching this, you should get the number of businesses within the industry as well so that you can calculate a claims per business ratio. Compare that ratio against highly litigious industries and against those that have very low litigation.
  
  
• You should also research whether clients in your field require insurance. If this is the case, then you have little choice. If you find that some require it while others don't, this is an indication that lawsuits are a real possibility and that it would be very prudent to get insurance.

Besides protecting yourself against litigation, having E&O insurance makes you appear more professional and thus improves credibility. It may just be the extra selling point that lands a new client.

Ask us about coverage. Call McFarlin Insurance Agency at (410) 312-7800 for more information on Maryland business insurance.