What is errors and omissions insurance coverage?
Key points
- Errors and omissions (E&O) insurance protects businesses if clients claim losses due to mistakes, negligence, or poor advice in professional services.
- It can cover legal costs, settlements, and judgments, but excludes intentional wrongdoing or criminal acts.
- Many service-based professionals benefit from E&O coverage, especially those who charge clients for expertise or advice.
- Costs vary based on factors like industry risk, number of employees, location, coverage limits, and past claims history.
Errors and omissions insurance is also known as professional liability insurance. It helps protect small business owners if a client holds them responsible for losses based on errors or omissions in their professional services or advice.
How can errors and omissions insurance help?
Errors and omissions insurance, sometimes referred to as E&O insurance, can help cover related financial losses if you are sued for harming another person or business through alleged negligence, inaccurate advice, misrepresentation or violation of good faith and fair dealing, explains the Insurance Information Institute (III). For example, E&O insurance may cover the cost of your legal defense, judgments, or settlements in situations like these according to the Insurance Journal.
Keep in mind errors and omissions insurance has a deductible and coverage limits. It also does not cover intentional harm or criminal acts.
Who can benefit from errors and omissions insurance?
Many types of businesses and business professionals may benefit from errors and omissions coverage, the III says. They include but aren't limited to:
- Real estate agents
- Consultants
- Software developers
- Accountants
- Engineers
- Architects
- Investment advisors
Medical malpractice insurance, carried by doctors and other medical professionals, is also a specific type of E&O insurance, the Insurance Journal explains.
Ultimately, if you charge clients a fee in exchange for services, you might benefit from E&O coverage. The Insurance Journal notes even the greatest employees are prone to make mistakes, and mistakes can be costly in any industry. For example, a wedding planner booking the wrong dates might not be a life-or-death situation like a surgeon operating on a patient. However, even a mix-up with the wedding's caterers or venue could lead to hurt feelings, emotional distress and financial damages.
Get a free business insurance quote.
Get protection tailored to your unique business. By clicking “get a quote” you will leave Allstate.com and be directed to the NEXT website*
get a quoteHow do you get errors and omissions insurance?
Your insurance provider can tell you if your insurer offers errors and omissions insurance, which some companies call miscellaneous professional liability insurance. They can advise you on E&O policy options and limits to properly protect your small business based on your specific risks and needs and help you purchase this coverage. Your insurance provider can also review other business insurance options to make sure your business has the right type of protection it needs based on the risks it faces.
How much does errors and omissions insurance cost?
The price of E&O insurance can vary widely depending on many factors, according to MoneyGeek. These can include but may not be limited to:
- Industry: Every profession deals with different risks and at different levels. For example, a flower shop and a construction company's risk profile might look a lot different.
- Number of employees: If you have many employees and take on a lot of large projects, you might be exposed to more risk and pay more for coverage.
- Location: Every state has its own rules. Similarly sized accounting firms in different places could have different requirements leading to different prices.
- Coverage limits: If you purchase more coverage, you can typically expect to pay a higher premium.
- Claims history: Business owners who have been subject to lawsuits in the past and have been forced to file claims might pay more for coverage in the future.
Since premiums are based on each business' unique situation, it's important to get a quote for coverage if you want to see how much you can expect to pay
What doesn't errors and omissions insurance cover?
Although errors and omissions insurance can help in several situations, it does not cover all business-related liability claims, the III says. For instance, dishonest actions or losses that you intentionally cause is 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.
Don't wait to get your business protected
Explore different coverage options and discounts. Take the next step towards getting a free, no-obligation quote that fits your situation and budget.