E&O Insurance: Coverage & Costs (2024)

Errors and omissions (E&O) insurance can help a small business if it makes a mistake and faces legal defense costs. E&O coverage even helps with disciplinary hearings from a regulatory or licensing board.

Even if a claim against your company is without merit, legal fees can be expensive and put a company’s finances at risk.

What Is Errors and Omissions Insurance?

Errors and omissions (E&O) insurance is a form of liability insurance that covers your business against claims of mistakes in professional services, such as services that are late, never delivered or inaccurate. Small business insurance companies may also call this coverage professional liability insurance.

E&O Insurance Claim Examples

Here are some examples of E&O claims:

• A real estate agent fails to disclose key information about a home.
• A public relations firm’s strategy results in a PR disaster.
• A marketing consultant provides advice that results in lost revenue.
• A tax preparer makes an error that results in a penalty.
• A contractor fails to complete a project on time.

What Does Errors and Omissions Insurance Cover?

Errors and omissions insurance covers actual errors and omissions in professional work, as well as other mistakes, including:

• Misrepresentation. This includes false or misleading statements, such as a real estate agent who makes a statement about a property that is misleading.
• Violation of good faith and fair dealing. Every contract has an implied duty that the parties involved will not destroy or injure another party’s right to receive the benefits of the contract.
• Negligence. This includes a failure to use reasonable care. For example, a website designer creates a website for a client that has security gaps that leads to a data breach.
• Inaccurate advice. This includes inaccurate advice or guidance that could cause your client financial harm, such as a financial consultant who provides inaccurate advice that leads to lost revenue.

If your business gets hit with an errors and omissions claim, you could be facing legal defense costs, including court costs and attorney fees, and paying any settlements or court judgments.

Depending on the claim, you could face disciplinary hearings from a regulatory or licensing board. As you defend yourself against an errors and omissions lawsuit, you could also incur a loss of earnings for your time spent in court and on depositions. Errors and omissions insurance helps pay for all these costs.

What Does Errors and Omissions Not Cover?

Common exclusions, issues not covered, for errors and omissions insurance include:

• Employment practices, including wrongful termination or harassment, aren’t covered under errors and omissions insurance. You will need an employment practices liability insurance policy to help with these costs.
• Patents and trade secrets that you’ve taken without permission are also not covered by E&O if you’re sued. A general liability insurance policy may offer some protection if you’ve stolen intellectual property.
• Bodily injury or property damage caused by your business wouldn’t be covered by an errors and omissions policy. For these claims, you would need a business liability insurance policy.
• Work-related illnesses and injuries fall under workers compensation insurance.
• Personally identifiable information that gets lost or stolen by your company isn’t part of errors and omissions coverage. A data breach insurance policy would help to cover these costs.

Who Needs E&O Insurance?

You will have to buy errors and omissions insurance in certain states and where licensing boards require it. For example, more than 10 states require real estate agents to show proof of errors and omissions coverage before they receive their real estate licenses.

In addition to real estate agents, here is a roundup of the types of businesses that can benefit from professional liability insurance.

• Accountants
• Advertising agencies
• Graphic designers
• Interior decorators
• Management and business consultants
• Tax preparers
• Technology professionals
• Travel agents

Is Errors and Omissions Insurance Required?

E&O insurance may be required for certain professions, such as attorneys, medical professions, contractors and real estate agents. These requirements vary by state and profession.

Even if E&O insurance is not required in your state, it’s still worth considering. Without this coverage you could face hefty out-of-pocket expenses if you get hit with a lawsuit for a mistake.

How Much Does Errors and Omissions Insurance Cost?

Errors and omissions insurance cost an average of $61 a month, according to Insureon. That’s $735 a year. The exact cost varies by profession and risk.

Slightly less than a third (32%) of small business owners pay less than $50 per month, while 39% pay between $50 to $100 per month, and 29% pay more than $100 per month, according to Insureon.

Monthly Cost of E&O Insurance by Profession

The cost of errors and omissions insurance is based on factors, such as:

• The size of the business and number of employees.
• The revenue of the business.
• The industry and the type of risks that you face.
• Business location and state.
• The past claims history of the business.
• The E&O coverage limits that you choose.

Where to Get an Errors and Omissions Insurance Quote

If you already have a business owners policy (BOP), you can typically add errors and omissions insurance to your BOP. That’s usually cheaper than buying a stand-alone policy. But you can also compare errors and omissions insurance quotes among multiple companies. Here’s a list of insurers that sell E&O insurance.

• Acuity
• Allianz
• Allstate
• AmTrust Financial
• Auto-Owners
• Axis Insurance
• Berkshire Hathaway
• Chubb
• Cincinnati Insurance
• Clear Blue Insurance Group
• CNA
• Frankenmuth Insurance
• Geico
• Hiscox
• Liberty Mutual
• Markel Insurance
• Nationwide
• Next Insurance
• Progressive
• State Farm
• The Hanover
• The Hartford
• Tokio Marine
• Travelers
• Westfield Insurance

How Does Technology Errors and Omissions Insurance Work?

Technology errors and omission insurance can pay legal fees and other costs from claims made against you by customers. It’s E&O insurance for those in the technology field.

Here are instances where technology E&O insurance would be useful:

• The software program you sold had glitches and ruined a client’s billing data.
• The equipment you installed malfunctioned and a customer was unable to receive orders.
• A website you created looks too similar to a competitor’s website.
• You missed important deadlines when developing a new technology product and this leads to a loss of revenue.
• You sold a product to a client that caused their system to crash.

Types of technology professionals that could benefit from technology E&O insurance include:

• Businesses that produce electronic components for computers
• Computer consultants
• Internet service providers
• IT contractors
• Software developers
• Website developers

Technology E&O Insurance vs. Cyber Liability Insurance

Cyber liability insurance helps when a business experiences cyberattacks and data breaches. Let’s say private customer information is stolen from your company’s database. If the customer files a claim against your company, cyber liability insurance will help pay for the costs.

By contrast, technology errors and omissions insurance would cover instances of negligence and product failures as well as errors and omissions made by your technology company.

Technology E&O coverage kicks in when you have had a hand in what went wrong for a customer. Cyber liability insurance can be used if your company is attacked by an outsider through a data breach or cyberattack.

Errors and Omissions Insurance Frequently Asked Questions (FAQs)