Errors and Omissions Insurance (E&O)


What is Errors and Omissions Insurance (E&O)?

Errors and omissions insurance (E&O) is a type of professional liability insurance that protects against claims arising from inadequate work or negligent actions. It is an important protection for businesses, their employees, and other professionals.

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What Does Errors and Omissions Insurance (E&O) Cover?

Different businesses such as doctors, lawyers, brokerage firms, travel agencies, insurance agencies, personal trainers, and wedding planners would require errors and omissions insurance. Errors and Omission insurance is a form of professional liability insurance not to be confused with Errors and Omissions Insurance is unique because it protects companies against claims made by clients in the case of negligent acts resulting in financial loss. An example of this type of suit could be a situation where a client would sue a brokerage firm because they lost money in an investment. The brokerage firm may have made all the investments within the guidelines of the firm, but defending your company against a suit can still be expensive.

How much does Errors and Omissions Insurance (E&O) cost?

The amount you pay for your E&O depends on the specific needs of your business. By taking into account factors such as the size of your business, claims history, years in business, and the type of business you operate, you can get an E&O policy that provides the coverage you need at a price that fits your budget.

Typical business may pay between $500 and $10,000 per year per employee depending on the factors listed above.

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Examples of Errors and Omissions Insurance claims (E&O)

For example: If a tax preparer makes a calculation error which causes his client to have to pay a penalty, the client would then have grounds to sue the accounting firm. In the case the firm is sued, E&O would pick up. The insurance company pays for the legal expenses involved in the court case against multiple companies. It also pays for any monetary damages rendered by the courts or settled in arbitration.

Having errors and omissions coverage helps the company avoid a substantial financial loss. Without this coverage, the company could face bankruptcy. If you or your employees are in the business of providing professional advice or other professional services, E&O insurance could be worth your consideration.

Who Needs Errors and Omissions Insurance (E&O)?

E&O insurance provides financial protection for professionals working in industries such as insurance, investments, real estate, and accounting. In the event of a mistake or omission made on behalf of a client, E&O insurance can help cover the costs. Many regulatory bodies mandate employees in these professions to obtain E&O coverage through their employer or independently.

Why Is Errors and Omissions Insurance Important?

The main purpose of E&O insurance is to protect the professional from lawsuits resulting from their services, specifically those related to financial advice and guidance. As the consumer landscape changes, so does the type of coverage and amount of liability needed. Professionals in personal or general insurance may need E&O insurance to protect themselves from litigation. Advising high-net-worth clients, for example, may be particularly challenging without adequate coverage.

Special Considerations

Almost any financial professional can obtain errors and omissions (E&O) insurance to protect themselves against claims that they are responsible for. The professional’s company may also be covered if the professional works for one. As with any type of insurance, parameters for eligibility vary by insurer, but there are some general guidelines that apply to all insurers.