E&O insurance is also known as professional liability insurance. It is designed to protect a business from the consequences of an error or omission made by the owner or an employee that results in a lawsuit. Companies who provide a service for a fee should acquire E&O insurance, as it covers certain situations that traditional business liability insurance does not. Professionals in the real estate industry, lawyers, insurance-related professionals, financial broker dealers and service firms like architects, designers and medical professionals should all consider purchasing errors and omissions insurance coverage. Not sure if this is for you? The licensed agents at Keslar Insurance can review your business and discuss the likely risks that may occur so you can consider the appropriate coverages for the things that are most likely to occur.
Errors & Omissions (E&O) Insurance – Frequently Asked Questions
1. What is E&O insurance?
Errors & Omissions (E&O) insurance is a type of professional liability insurance that specifically protects businesses that provide advice or services from claims of negligence, mistakes, or failure to deliver.
2. Who typically needs E&O coverage?
E&O is common for real estate agents, insurance agents, financial advisors, consultants, tech service providers, marketing professionals, and other service-based businesses.
3. How is E&O different from professional liability?
Technically, E&O is a form of professional liability, but the term “E&O” is more commonly used in industries like finance, insurance, and technology, whereas “professional liability” is more often used for licensed professions like law, medicine, or engineering.
4. What kinds of claims does E&O insurance cover?
Claims related to miscommunication, incorrect advice, service delivery errors, documentation mistakes, or failing to meet contractual obligations that lead to financial harm.
5. Does E&O cover data breaches or cyber issues?
No—E&O won’t typically cover cyber liability. For data breaches or hacking incidents, you’d need a separate Cyber Liability Insurance policy.
6. Can E&O help if a client is simply unhappy with my service?
Yes. Even if you did everything right, a client can still allege negligence or demand compensation. E&O covers legal defense and settlement costs, even for unfounded claims.
7. Is E&O insurance required?
Sometimes. Some professional associations, licensing boards, or client contracts may require E&O insurance. Even when not required, it’s a critical safeguard for service-based businesses.
8. Does E&O cover independent contractors or subcontractors?
Policies vary. Some may cover contractors working under your supervision, while others may require each contractor to carry their own E&O policy.
9. What’s the difference between claims-made and occurrence policies?
Most E&O policies are claims-made, meaning the policy must be active when the claim is filed. This makes continuous coverage critical.
10. How much E&O coverage do I need?
Coverage amounts depend on your industry, contract size, and client expectations. Many professionals carry $1M to $2M in coverage, but higher-risk sectors may need more.
