Who Needs Errors and Omissions Insurance? (2024)

FAQs

Who needs errors and omissions liability? ›

Who Needs E&O Insurance? Errors and omissions insurance helps protect businesses from mistakes or errors in the professional services they provide. So, any small business that regularly gives their customers advice or offers services to clients should get this coverage.

Any business that offers a professional service or advice likely needs E&O insurance. Examples are insurance agents, doctors, lawyers, wedding planners, and financial advisors.

E&O is most used by those in real estate, insurance, IT professionals, and tax preparers. Professional liability coverage is typically used by architects, consultants, engineers, and accountants and CPAs.

You should consider errors and omissions insurance coverage if you provide services to clients or customers, like real estate agents or accountants. Some other examples of small businesses that need this coverage include: Advertising firms. Marketing agencies.

Specific types of claims include mistakes, oversights, or failure to disclose certain information. Under E&O insurance, both the company and its employees are covered.

Professional Liability insurance, also known as Errors and Omissions (E&O) coverage, is designed to protect your business against claims that professional advice or services you provided caused a customer financial harm due to actual or alleged mistakes or a failure to perform a service.

This insurance won't help your business with claims of: Illegal acts and purposeful wrongdoing, such as intentionally breaking the law or deceiving your customers or clients. Bodily injury or property damage that your business causes. For these kinds of claims, you'll need a general liability insurance policy.

Marketing consultant providing advice that caused your client to lose money on their product or service. They file a claim against your marketing company as a result. Tax preparer making a calculation error which caused your client to have to pay a penalty. As a result, they sue your accounting firm.

You need errors and omissions insurance if you're in the business of providing a service to clients for a fee. We typically provide E&O coverage to printers and building-trades contractors, such as electricians, plumbers, HVAC installers and sheet metal workers.

How Much Does Errors and Omissions (E&O) Insurance Cost? The cost of E&O insurance can vary significantly based on several factors. On average, small businesses can expect to pay between $500 to $1,000 per year for coverage.

Who pays for errors and omissions? ›

An errors and omissions insurance policy will generally cover the business owner along with all salaried and hourly employees of the company. Most policies also extend to provide coverage for any subcontractors you have working on behalf of your business.

Dishonest, Intentional, Malicious or Criminal Acts

While E&O policies cover negligent acts, errors and omissions, they generally exclude claims arising out of dishonesty, intentional wrongdoing or criminal acts.

Any company that sells a product to a third party – whether a manufacturer, reseller, importer or distributor – should look for a liability policy that offers cover for financial loss as a result of a faulty product or delays.

Examples of professionals required to carry E&O insurance

Medical professionals – i.e., doctors, nurses, and therapists – are required to carry minimum amounts of malpractice insurance in most states.

What triggers coverage on a claims-made policy? Claim must be made during the policy period. Claim must be reported during the policy period. Most policies allow a 30 to 60 day period after policy expiration in which you can still report claims made during the policy period—check your policy for specific provisions.