What is errors and omissions insurance coverage?

Last updated: January 1

Errors and omissions insurance is also known as miscellaneous professional liability insurance. It helps protect small business owners if a client holds them responsible for losses based on mistakes or erroneous advice supplied by the business.

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How can errors and omissions insurance help?

Errors and omissions is a special kind of insurance for professionals who provide services or advice, the Insurance Information Institute (III) says. If they are sued for harming another person or business, errors and omissions insurance, which is sometimes referred to as E&O insurance, can help cover related financial losses.

For example, suppose a client sues you for alleged negligence, providing inaccurate advice, misrepresentation or violation of good faith and fair dealing, the III says. In situations such as these, errors and omissions insurance may help cover the cost of your legal defense or a judgment or settlement against you, according to the Insurance Journal.

Many types of businesses and business professionals may benefit from errors and omissions coverage, the III says. They include:

  • Real estate agents
  • Consultants
  • Software developers
  • Accountants
  • Engineers
  • Architects
  • Investment advisors

Malpractice insurance, which is carried by medical professionals, is also a specific type of E&O insurance, the Insurance Journal explains.

Keep in mind that you may need to pay a deductible before errors and omissions insurance begins to help pay for a claim. And, like any type of insurance, your policy will only pay up to its coverage limit.

How do you get errors and omissions insurance?

Your local agent can tell you if your insurer offers errors and omissions insurance, which some companies call miscellaneous professional liability insurance, and help you purchase this coverage. Your agent can also help you review other business insurance options so you can select the coverages and limits that fit your needs.

What doesn't errors and omissions insurance cover?

Although errors and omissions insurance can help in a number of situations, it does not cover all business-related liability claims, the III says. For instance, dishonest actions or losses that you intentionally cause are not covered by errors and omissions insurance.

Other types of liability claims, such as discrimination or product liability complaints, are not covered by E&O insurance. However, you may be able to purchase separate coverage to help protect yourself against those types of claims.

Other types of business coverage you may need

You may want to consider other types of business insurance to help protect you against scenarios not covered by errors and omissions insurance. For instance:

  • Commercial general liability coverage. This coverage is typically part of a standard business owners policy. It may help pay for costs such as your legal expenses or another person's medical bills resulting from an accident at your business.
  • Product liability insurance. This coverage helps pay for expenses that result if a product that your business designs, makes or sells injures another person or damages their property.
  • Employment practices liability insurance. This coverage helps pay for legal expenses if your business is sued by an employee or contractor for certain reasons, such as discrimination, retaliation or wrongful termination.
  • Non-owned auto liability insurance. If you have employees who use their personal vehicles, rather than a company-owned vehicle, to conduct business, this type of insurance helps pay for another person's medical bills or property damage if your employee causes an accident while on the job.
  • Data compromise coverage. This coverage helps a business pay for certain costs that result from a data breach, such as creating informational materials and providing credit monitoring services for affected people, or helping pay for related legal fees.

Errors and omissions insurance is among the types of liability protection that may benefit a small business owner. By understanding how each type of liability protection works and choosing the coverage that fits your needs, you can run your business with greater peace of mind.