Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Errors and omissions insurance is a professional indemnity insurance that covers companies and professionals who provide services to clients that have potential risks.

In the event that they are held responsible for a service they delivered or didn’t deliver that had expected results, the E&O insurance covers any litigation costs or negligence claims.

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Error and omissions is sometimes referred to as professional liability insurance, which is a type of business insurance designed to protect people who provide services that can result in certain mistakes or errors. Having an E&O insurance policy can protect them in the event that a customer or client files a claim against them.

Classifying Errors & Omissions

There are many different ways that error and omissions insurance can be categorized depending on what kind of service is being provided. For example, those in the medical field may have the insurance labeled as malpractice insurance whereas those who provide professional advisory services would have error and omissions insurance labeled as professional liability.

E&O can be used to cover both a company and specific individuals from the lawsuit, claims of a settlement, or even legal costs. Regardless of the judgment of a court, a lot of money must be spent in order to facilitate a defense over a lawsuit. This can be damaging to any kind of company and having errors and omissions insurance can protect that company and individual from any error or omission that might cause financial loss to a client.

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Who E&O Is Ideal for:

Having understood what E&O is, it is important to find out who needs this kind of insurance the most and how they can get it. Traditional business insurance may not be enough for many professionals and extra coverage may

be necessary.

Errors and omissions insurance is for professionals who work in fields where their actions and work can cause potential harm on clients. These would include doctors, accountants, lawyers, architects and others in professional fields.

Life is not perfect and as long as you are providing a professional service for a fee, you are exposed to the likelihood of an error or omission.

This means that the type of service that you provide can result in some E&O so you should know full well what could happen if an error or omission results that costs clients more money than anticipated and is damaging to their reputation. This is why you would need E&O coverage to protect you in the event of such an occurrence.

What You should Know about Error and Omissions

If you are running your own company that provides services to clients, you should know that there are risks in almost any business. If you are dealing with matters that are time sensitive and something goes wrong, it is likely that you will have to bear the costs especially if it was in your power to facilitate the end result.

This can happen in any service business, whether you are a doctor who missed an operation or an lawyer who gave a client advise, as long as something goes wrong that can result in some kind of financial harm to a client, you are in the line of fire.

The exposure to E&O would mean that your company could suffer a great financial loss and usually there are no general kinds of insurance policies that cover these kinds of mishaps aside from the E&O insurance.

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Getting Coverage, When and How

Whatever legal action is taken, even if you are not guilty, will leave you defending  your company and yourself and the cost can be substantial. Having an error and omissions insurance policy would protect you and your company in such an event and covers various judgment and settlement claims.

There is an old saying that prevention is better than the cure and being in a business or professional field where there are known risks that could result in financial loss, you need to provide yourself and your company with the right insurance cover.

Usually you are better off taking up an error and omissions insurance policy before you venture out into any kind of risky business.

When you deal with certain clients, you will be required to provide insurance up front in order to be awarded a contract and having your error and omissions insurance in place is good backing that you know what you are getting into and that you will be covered should an error or omission result from the contract.

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One Size Does Not Fit All

When it comes to error and omissions insurance, you cannot find a general coverage plan. You have to get specific because different professionals are exposed to various risks and potential errors. Finding the right E&O coverage is all about reading through the fine print.

You need to compare the policies and decide which one works the best for you as per your line of professional work. Again it all depends on what kind of risk and error exposure you might have so your particular profession will dictate what kind of E&O insurance policy is right for you. You must read through the fine print as well. Most error and omissions insurance insurance policies are designed to provide coverage when claims are reported.

So if you don’t know what your reporting period is, you might not see the results of your E&O policy. This is sometimes called a retroactive date because whatever claims were made before the exact date of the E&O may not be covered depending on your agreement with the insurance provider.

Have a Backup Plan

Some policies may also provide you with defensive claims or money to defend yourself in court so you should know what is covered in your error and omission policy.

What should happen in the event that you are working with a client where you might be exposed to errors and omissions? Well the first thing to always do is to have a written agreement or contract written down the details of all that has to be done.

You might also need to have quality control measures in place to help dictate how progress will be judged. Also consider having someone externally monitor the progress.

Since the E&O insurance policies are not general insurance, you would need to look for specialty insurance that covers specific businesses, locations and claims and this varies from insurance agency to agency so you are better off comparing your options and reading through the fine print. If you find yourself in a position where you might be exposure to certain errors and omissions, you should consider getting errors and omission insurance coverage.