Educating Clients About Insurance
Insurance is the transfer of pure risk from one party to another, for a price, through a legal contract that spells out the terms of the contract as well as the perils both covered and not covered. For design professionals, a key set of professional and business risks arises from the possibility of causing harm because of their negligence in performing professional services. These negligent acts, errors, or omissions may cause damage to clients, contractors, or other third parties, and the firm may find itself liable for these damages.
In buying a professional liability insurance policy (sometimes inappropriately called errors and omissions or E&O insurance), the firm is asking a broader financial entity—the insurance company—to absorb a portion of the costs of claims in exchange for a premium paid to the insurance company.