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Errors and Omissions Insurance: Protecting Professionals and Businesses

As a professional insurance agent at Blake Insurance Group, I understand the importance of having comprehensive coverage to protect against potential risks and liabilities. One type of insurance crucial for professionals and businesses is errors and omissions insurance. This article will explore what errors and omissions insurance is, its key benefits, and the professions and industries that commonly require it. So, let’s dive in and uncover the nuances of errors and omissions insurance!

Errors and omissions insurance, also known as professional liability insurance, protects professionals and businesses from claims of negligence, errors, or omissions in the services they provide. It provides financial protection in case a client alleges that your professional advice or work caused them financial harm.

Imagine you’re a financial advisor providing investment advice to a client. If that advice leads to financial losses for the client, they may file a lawsuit against you, claiming negligence. Errors and omissions insurance would cover legal expenses, settlements, or judgments, ensuring your business doesn’t suffer significant financial setbacks.


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errors and omissions insuranceKey Benefits

Now that we understand the basic concept of errors and omissions insurance let’s explore its key benefits:

**Financial Protection**: Errors and omissions insurance provides financial protection by covering legal costs, settlements, or judgments resulting from professional negligence claims. This can save your business from significant financial losses that could otherwise be devastating.

**Peace of Mind**: Having errors and omissions insurance gives you peace of mind, knowing you have a safety net in case a client files a lawsuit. It allows you to focus on your work without constantly worrying about a mistake’s potential legal and financial consequences.

**Enhanced Professional Reputation**: By having errors and omissions insurance, you demonstrate to your clients that you take your profession seriously and are committed to providing quality services. This can enhance your professional reputation and instill confidence in your clients.

**Legal Support**: Errors and omissions insurance often includes access to legal resources and expertise. In the event of a claim, you can rely on the insurance company’s legal team to guide you through the process and help you navigate the complexities of the legal system.

Who Needs It?

Errors and omissions insurance is essential for various professions and industries with a higher risk of professional negligence claims. Here are some examples:

**Medical Professionals**: Doctors, surgeons, dentists, and other healthcare professionals can benefit from errors and omissions insurance. Medical malpractice claims can be financially devastating, and having this coverage can provide the necessary protection.

**Legal Professionals**: Lawyers, attorneys, and law firms face the risk of professional negligence claims. Errors and omissions insurance can safeguard them from potential lawsuits arising from mistakes or omissions in legal advice or representation.

**Financial Advisors**: Financial advisors, accountants, and tax professionals can benefit from errors and omissions insurance. Providing financial advice or handling clients’ financial matters carries inherent risks, and this coverage can protect against potential claims.

**Real Estate Professionals**: Real estate agents, brokers, and property managers can face claims related to errors or omissions in property transactions. Errors and omissions insurance can provide the necessary protection in case of legal action.

**Technology and IT Professionals**: Software developers, IT consultants, and technology service providers can benefit from errors and omissions insurance. Claims related to software failures, data breaches, or inadequate IT solutions can be financially damaging, and this coverage can mitigate those risks.

Remember, these are just a few examples, and many other professions and industries can benefit from errors and omissions insurance. It’s crucial to assess your specific risks and consult with an insurance professional to determine the appropriate coverage for your business.

Cost of Errors and Omissions Insurance

Errors and Omissions (E&O) insurance, also known as professional liability insurance, protects businesses against claims of mistakes, negligence, inadequate work, inaccuracies, misrepresentation, or similar allegations. The cost of E&O insurance varies significantly based on several factors, including the industry, business size, location, and claims history.

Average Cost of E&O Insurance

Small businesses pay around $61 per month, or about $735 annually, for E&O insurance. However, depending on the profession, the cost can range from $350 to $1,800 per year. For larger corporations, policies covering up to $1,000,000 per policy term aren’t uncommon.

Factors Influencing the Cost

**Industry**: The type of professional service a business offers can significantly impact the cost of premiums. Some industries are deemed higher risk than others and incur higher premiums. For instance, technology companies like IT professionals tend to experience higher premiums.

**Business Size**: The number of employees a business has can also affect the cost of E&O insurance. Larger businesses with more employees are often considered riskier and face higher premiums.

**Location**: The location of a business can influence the cost of E&O insurance. Rates are often higher in metropolitan areas with dense populations.

**Claims History**: Insurance companies look at a business’s claims history to determine how risky it is to insure. Companies with past E&O claims will pay more for insurance than those without a claims history.

**Coverage Limits**: A business’s coverage can also affect the cost. Businesses opting for higher coverage limits typically pay more for their policy.

**Deductible Amounts**: The deductible amount chosen by a business can impact the cost of E&O insurance. Higher deductibles usually result in lower premiums, which means the business will have to pay more out-of-pocket if a claim is made.

Coverage of Errors and Omissions Insurance

Errors and Omissions (E&O) insurance, also known as professional liability insurance, protects businesses against claims of mistakes, negligence, inadequate work, inaccuracies, misrepresentation, or similar allegations. It is designed to cover a client’s financial losses resulting from these errors or omissions in the services provided by the business.

What E&O Insurance Covers

E&O insurance typically covers the following:

**Legal Expenses**: This includes attorney fees, court costs, and administrative expenses associated with defending against a claim.

**Settlements and Judgments**: E&O insurance can cover settlements or judgments up to the policy’s limits if a business is found liable.

**Claims from Past Services**: Some E&O policies cover claims resulting from services provided in the past as long as the claim is made during the policy period. The extent of this coverage often depends on the retroactive date specified in the policy.

It’s important to note that E&O insurance is typically issued on a “claims-made” basis, meaning it covers claims made during the policy period, regardless of when the alleged error or omission occurred.

What E&O Insurance Does Not Cover

While E&O insurance provides essential coverage for many professional liability risks, it does not cover everything. Here are some standard exclusions:

**Intentional Misconduct**: E&O insurance does not cover claims arising from intentional, fraudulent, dishonest, or criminal acts.

**Bodily Injury and Property Damage**: These are typically covered under general liability insurance, not E&O insurance.

**Employment Disputes**: Claims of sexual harassment, wrongful termination, workplace discrimination, and similar issues are not covered under E&O insurance. These may be covered under Employment Practices Liability Insurance (EPLI).

**Claims Covered by Other Insurance**: E&O insurance does not cover claims covered by other business insurance types. For example, data breaches and cyberattacks are covered by cyber insurance, while bodily injuries and property damage to customers are covered by general liability insurance.

Best Practices to Prevent E&O Claims

Errors and Omissions (E&O) claims can be costly and damaging to a business’s reputation. Here are some best practices to minimize the risk of such claims:

**Maintain Written Documentation**: Document all client interactions, including phone calls, meetings, and emails. This should include the date and time, the names of the client and agent, the nature of the conversation, any actions needed, and a note of completion when the desired actions are taken.

**Standardize Office Procedures**: Develop a comprehensive office procedure manual that outlines the roles and responsibilities of each employee, agency standards, file maintenance procedures, and more. This promotes consistency and continuity in your operations.

**Regularly Review Client Accounts**: Review client accounts to identify potential gaps or discrepancies before a claim arises. This can be facilitated by using technology to optimize client interactions and implement automated communications.

**Provide Adequate Training**: Ensure all employees receive proper technical training, communication skills training, and time management and organizational skills training.

**Understand Client Needs**: Take the time to understand the client’s needs and assets to determine the right amount of risk management. More than half of E&O cases stem from a failure to provide the right amount of coverage.

**Use Detailed Contracts**: Use detailed written contracts for all work to clearly define the scope of services, responsibilities, and expectations.

**Communicate Effectively**: Clear and effective communication can prevent misunderstandings that could lead to E&O claims. If you are unsure of an answer or situation, let the client know you will research it and get back to them.

**Implement Quality Assurance Processes**: For businesses providing software development and digital services, establish a Quality Assurance (QA) process to ensure the quality of your deliverables.

**Use Technology**: Make the most of technology to optimize client interactions, automate communications, and maintain strong IT security.

**Do Your Own Due Diligence**: Investigate the financial standing and reputation of any company whose products you are selling. Check the company’s reputation for denying claims or underwriting “after the fact.”

Remember, while these practices can significantly reduce the risk of E&O claims, preventing all claims is impossible. Therefore, maintaining a comprehensive E&O insurance policy is crucial for any business providing professional services.

Common Misconceptions

Debunking myths and misunderstandings about errors and omissions in insurance can help you make better-informed decisions. Here are a few common misconceptions:

**General Liability Insurance is Sufficient**: General liability insurance typically covers bodily injury and property damage claims, but it may not cover claims related to professional errors or omissions. Errors and omissions insurance provides specialized coverage for professional liabilities.

**Only Large Businesses Need Errors and Omissions Insurance**: Errors and omissions insurance is not limited to large businesses. Small businesses and independent professionals can benefit from this coverage, as a single claim can have a significant financial impact.

**Errors and Omissions Insurance is Expensive**: While the cost of errors and omissions insurance varies depending on factors such as business size and claims history, it is often a worthwhile investment considering the potential financial risks and liabilities it protects against.

Renewal and Policy Maintenance

To ensure continuous coverage and stay protected, consider the following guidelines for reviewing and renewing your errors and omissions insurance policy:

**Regular Policy Review**: Review your policy annually or whenever there are significant changes in your business, such as new services, expansion, or changes in the regulatory landscape. This ensures that your coverage remains adequate and up to date.

**Renewal Process**: Start the renewal process well before your policy expiration date to allow time for any necessary adjustments or changes. Review your policy terms, limits, and deductibles to ensure they still meet your needs.

**Consult with an Insurance Professional**: Work with an experienced insurance agent or broker specializing in errors and omissions insurance. They can guide and help you navigate the renewal process, ensuring you have the right coverage in place.

Remember, errors and omissions insurance is a critical component of comprehensive coverage for professionals and businesses. By choosing the right policy, debunking common misconceptions, and maintaining regular policy reviews and renewals, you can protect your business from potential liabilities and financial risks. Consult with an insurance professional to ensure you have the appropriate coverage tailored to your specific needs. Stay protected and focus on providing exceptional services to your clients!

Claims Process for Errors and Omissions Insurance

Claiming an Errors and Omissions (E&O) insurance policy involves several steps, from the initial reporting to the resolution of the claim. Understanding this process is crucial to ensure that claims are handled efficiently and effectively.

Reporting the Claim

**Review Your Policy**: Before reporting a claim, it’s essential to review your E&O policy to understand the coverage limits, exclusions, and any conditions that must be met.

**Immediate Notification**: If you face a potential claim, you should immediately report it to your E&O carrier. Timely reporting is critical because E&O policies are typically “claims made” policies, and late reporting can lead to a denial of coverage.

**Written Notification**: Claims must be reported in writing to the carrier. Simply calling a broker is not sufficient to report a claim.

**Gather Documentation**: Collect all necessary documentation related to the claim, such as contracts, invoices, correspondence, and any other relevant information demonstrating the nature of the error or omission.

Role of the Claims Specialist

**Investigation**: A claims specialist will investigate the claim, which includes evaluating the details and negotiating claims to a successful resolution.

**Legal Assistance**: Your insurance carrier may assist you in finding a lawyer who specializes in E&O claims. This lawyer will review the claim and request a summary of information, including the parties involved and the nature of the claim.

Importance of Timely Reporting and Documentation

– **Preventing Complications**: Prompt action and effective communication are vital to reduce the likelihood of complications in the claims process.

– **Avoiding Increased Costs**: Late reporting can significantly increase claim costs. For example, claims reported after 14 days can be more complex, take longer to close, and result in higher expenses.

– **Substantiating Your Defense**: Proper documentation plays a pivotal role in defending against E&O claims. Detailed client interactions and transaction records can substantiate your actions and intentions if a dispute arises.

Top Companies Offering E&O Insurance

When considering Errors and Omissions (E&O) insurance, choosing a reputable company that offers comprehensive coverage options tailored to your business needs is important. Here are some of the top companies offering E&O insurance, along with insights into their coverage options and market reputation:


– **Best For**: Best E&O Overall

– **Financial Strength**: Good

– **Rating**: 10/10

– Hiscox offers various E&O insurance policies suitable for various professional services. They are recognized for their overall excellence in E&O coverage.

Next Insurance

– **Best For**: Best Customer Experience

– **Financial Strength**: Good

– **Rating**: 9.5/10

– Next Insurance provides a seamless online experience for customers seeking E&O coverage quickly and efficiently. They are praised for their customer service and ease of use.

Liberty Mutual

– **Best For**: General Contractors

– **Financial Strength**: Excellent

– **Rating**: 9.5/10

– Liberty Mutual is a well-established insurer with a strong financial background, offering E&O insurance that is particularly well-suited for general contractors.


– **Best For**: Home Inspectors

– Progressive offers E&O insurance tailored to the needs of home inspectors, providing them with the necessary protection against professional liability claims.


– **Best For**: Architects & Engineers

– Travelers is known for its specialized E&O insurance policies designed for the unique risks architects and engineers face.

The Hartford

– The Hartford is another reputable provider that allows businesses to add E&O coverage to a business owner’s policy (BOP), which can be more cost-effective than purchasing a standalone policy. They are known for their comprehensive coverage options.


– Nationwide offers customized E&O insurance policies to meet the specific needs of different businesses and industries, such as building trades and printers. They emphasize the importance of a policy’s retroactive date for extended coverage.


– Chubb is considered a premium option for E&O insurance, offering robust policies for various professional services. They have a strong reputation for their coverage options and service.

AIG and Allied World Assurance Company

– These companies are also notable for their public E&O insurance offerings, providing coverage that caters to the needs of public companies and entities.

When selecting an E&O insurance provider, it’s crucial to consider the company’s financial stability, customer service reputation, and the specific coverage options that align with your business’s risk profile. Obtaining quotes and reviewing policy details from multiple insurers is recommended to ensure the best fit for your needs.