AD Banker Comprehensive Practice Exam

What type of policy typically covers claims related to professional negligence?

1. Errors and Omissions Policy

2. Liability Policy

3. Commercial Property Policy

4. Health Insurance Policy

The correct answer is: Errors and Omissions Policy

The correct answer is an Errors and Omissions Policy, which is specifically designed to protect professionals against claims arising from negligence or inadequate work in their professional duties. This type of coverage is essential for individuals in professions such as law, accounting, consulting, and healthcare, as it applies to situations where a mistake or failure to perform a duty results in financial harm to a client. Errors and omissions coverage addresses the legal liability for errors that could occur in the service provided and ensures that professionals can defend against claims without depleting their personal or business finances. This type of policy typically covers legal costs, settlements, and judgments that may arise from lawsuits related to professional activities, making it a crucial safeguard for those operating in a professional capacity. In contrast, other types of policies such as Liability Policies generally cover broader liability risks but do not focus specifically on professional negligence. Commercial Property Policies are aimed at protecting physical assets and property rather than addressing professional services. Health Insurance Policies are designed for medical expenses coverage related to health conditions, rather than for claims of professional malpractice or negligence.