What You Need to Know About Errors and Omissions Insurance

Also known as E&O insurance and professional liability insurance, errors and omissions policy protects businesses from claims of work-related negligence, mistakes, inaccuracies, inadequate work, and similar allegations. If you provide services to customers, you should have this type of business insurance. Learn more about it, what it covers and why you need it.


E&O may pay for costly legal defense against covered problems. These include work errors and oversights, failure to meet a service deadline, failure to meet a standard, professional negligence, omissions, misrepresentation, inaccurate advice, and breach of good faith and fair dealing. 

If someone files a lawsuit for a mistake in your professional or business service, your tailored errors and omissions coverage can cover your attorney’s fees, court costs, or pay for expert witnesses, administrative costs, settlements, and judgments. Take note that the claim should be filed within your policy or extended reporting period. The incident should be within the date your policy is eligible for coverage. 


The cost of a professional liability claim can be too expensive to put your business at risk of closing. Even if the case closes or drops, the legal expenses could still cost a lot. If you end up being at fault, expect to pay out-of-pocket for a large sum of the settlement. The benefits errors and omissions insurance gives your business or profession vary depending on the policy and insurance company.    


Like other forms of insurance, E&O also has exclusions. It does not cover claims from incidents that happened before the policy’s retroactive date. It also does not help your business with any of the following claims:

  • Illegal acts, purposeful wrongdoing. Intentionally doing illegal actions and deceiving customers.
  • Property damage and bodily injury. You will need separate general liability insurance for your E&O policy does not cover this.
  • Employee illness or injury. You need separate workers’ compensation insurance policy to cover medical expenses and lost wages.
  • Harassment or discrimination filed by your worker. Employment practices liability insurance covers this type of claim. 
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Who needs it?

If you provide professional services, you need E&O insurance. These include architecture, accounting, financial advising, engineering, advertising, consulting, etc. If your business offers printing, hair treatments, or pet grooming, you also need a form of this insurance. Some professionals are required to carry errors and omissions insurance by law, professional associations, or licensing boards


Generally, errors and omissions insurance is based on claims. The claim must be within the coverage period for the insurance provider to cover it. Legal fees can be daunting even when a court rules in your favor. This form of professional liability insurance can cover court costs and settlements up to a specified amount. The more litigation problems you have, the more expensive the errors and omissions insurance will be. 

A mistake that causes financial harm can occur during transactions in many professions; that is why many other occupations purchase this type of insurance. They include doctors, dentists, attorneys, engineers, website developers, wedding planners, etc.  

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