⏰ Estimated read time: 6 minutes
Errors and omissions insurance, also called E&O insurance, protects businesses against claims of mistakes, negligence, inadequate work, inaccuracies, misrepresentation or similar allegations.
Your business should have E&O insurance if it provides services to customers for a fee.
What is errors and omissions insurance?
E&O insurance is business insurance coverage that protects your company if someone accuses you of making a mistake.
Errors and omissions insurance may cover you if you’re accused of the following:
Errors or oversights in your work.
Failure to deliver a service or missed deadlines.
Professional negligence or failure to meet a standard of care.
Breach of contract.
Errors and omissions insurance is a kind of professional liability insurance, and the two terms are used interchangeably in some industries.
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Where to get E&O insurance
Errors and omissions insurance is a common type of coverage that all major commercial insurers offer. Start your search with these companies.
Next Insurance
Best for: Getting a quote and buying an E&O policy online in minutes.
If you need coverage quickly, you may be able to buy it from Next in a matter of minutes. Next’s E&O insurance policies start at $19 per month, and you may be able to get a discount if you buy other policies through the company. Read NerdWallet’s review of Next Insurance.
The Hartford
5.0
NerdWallet rating
Best for: Adding E&O coverage to a business owner’s policy.
If you need E&O coverage alongside a business owner’s policy, consider buying both from The Hartford, which allows you to tack E&O coverage onto a BOP. You can get an E&O insurance quote from The Hartford online, but you may have to talk to someone on the phone to complete your purchase. Read NerdWallet’s review of The Hartford business insurance.
State Farm
3.5
NerdWallet rating
Best for: Working with an insurance agent.
If you want a professional to handle your business insurance for you, you can enter your ZIP code on State Farm’s website and a local agent will contact you. That agent can help you get a quote and purchase E&O insurance, among other policies. State Farm earned a lower star rating from NerdWallet than other providers because customers have filed a higher-than-expected number of complaints with state regulators —but the company topped the customer satisfaction ratings in J.D. Power's 2022 U.S. Small Commercial Insurance Study. Read NerdWallet’s review of State Farm business insurance.
NerdWallet recommends getting business insurance quotes from several companies so you can compare costs and coverage details.
🤓 Nerdy Tip
If you need insurance for a home-based business, note that you can’t get errors and omissions insurance under homeowners insurance endorsem*nts or in-home business policies. You’ll need to buy a separate policy.
What does errors and omissions insurance cover?
If someone files a lawsuit against your business, E&O insurance can pay out to cover:
Legal and court costs. This includes attorney fees and other costs a business must pay to deal with a covered claim, whether or not the legal system finds you at fault.
Settlements or judgments owed. If the business owner is found to be at fault, errors and omissions insurance can help with these payments.
Damages and expenses. Your business might have to pay these if it infringes on someone else’s copyright, for instance.
Some E&O policies will even cover work done outside of the country.
» MORE: General liability vs. professional liability: What’s the difference?
What doesn’t E&O insurance cover?
E&O insurance may not cover:
Illegal acts.
Purposeful wrongdoing.
Bodily injury your business causes (general liability insurance typically covers that).
Property damage your business causes.
Data leaks (cyber liability insurance typically covers that).
Employee injuries or illnesses (workers' compensation insurance typically covers that).
Discrimination or harassment claims from employees (employment practices liability insurance typically covers that).
In general, errors and omissions insurance policies are claims-made policies, which means coverage must be in place at the time a claim is made in order for the insurer to cover it. If your coverage lapses, you’ll no longer be protected.
E&O insurance policies can be retroactive to a specific date defined in the policy. That means they’ll cover claims of alleged mistakes dating back to that point, but not before.
Who needs errors and omissions insurance?
If you provide professional services to customers for a fee, you should have some form of errors and omissions insurance.
Those professions might include:
Accounting.
Architecture.
Financial and investment advising.
Insurance.
IT consulting.
Real estate.
Some professionals are required to carry E&O insurance, whether it’s by law, licensing boards or professional associations. For example, Tennessee and Rhode Island both require real estate agents to have E&O policies in place in order to be licensed.
Clients may also ask for proof that you have E&O insurance and decline to work with you if you don’t provide a certificate of business insurance.
» MORE: Do consultants need professional liability insurance?
How much does errors and omissions insurance cost?
The cost of E&O insurance varies. For example, insurance provider The Hartford estimates that business owners spend an average of $500 to $1,000 per employee per year on E&O coverage.
How much this insurance will cost you depends on several things, including:
Whether you’re in a high-risk industry.
How much coverage you want.
Whether there's a history of liability claims against your business.
Where you do business.
Number of employees.
To find out how much business insurance will cost for your company, get quotes from several insurance providers.
Frequently Asked Questions
Businesses that provide services to customers for a fee likely need errors and omissions insurance or another kind of professional liability insurance. Some of your clients, business partners or licensing boards might also require you to have E&O insurance.
Claims against your business may not be covered. Errors and omissions insurance is typically “claims-made,” which means the policy has to be in effect when the event took place and when a lawsuit is filed in order for the insurer to pay the claim.
Often, professional liability insurance is simply another term for errors and omissions insurance. Which term is used typically varies by industry. For example, legal and medical malpractice insurance are unique types of professional liability insurance.
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