Errors and omissions insurance protects your business when clients claim your work caused them harm. For example, if you're a financial advisor and a client sues you for $150,000 claiming your investment advice led to major losses in their retirement account, E&O insurance would cover your legal defense and any settlement. Most people call it professional liability insurance because you can interchange these terms.
What Is E&O Insurance?
E&O insurance covers professional mistakes and negligence claims when clients say your services caused financial harm.
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Updated: October 27, 2025
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Key Takeaways
Errors and omissions (E&O) insurance protects you when clients claim your advice or professional services caused them harm.
E&O covers professional negligence and missed deadlines but excludes cyber liability, bodily injury, intentional wrongdoing and criminal acts.
Financial advisors, real estate agents, IT consultants and accountants benefit most from E&O coverage due to their high-risk decisions.
What Is E&O Insurance?
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E&O Insurance vs. General Liability Insurance
Most businesses need two standard insurance policies: errors and omissions insurance and general liability insurance. Here's what each one covers and when you'll use them:
What It Covers | Professional mistakes, negligence, failure to deliver services | Bodily injury, property damage, personal injury |
Average Monthly Cost | $78 | $104 |
Typical Claims | Client loses money due to your advice or services | Someone gets injured on your property or by your products |
Best for Industries Like | Consultants, financial advisors, tech companies, real estate agents | Restaurants, retail stores, contractors, manufacturers |
Note: These rates are for small businesses with two employees across 79 major industries or business types and focus solely on general liability policies.
Take this scenario: A real estate agent failed to disclose a property defect, costing the client $35,000 in repairs. The client tripped on a loose carpet during a meeting at the realtor's office. That's where both policies come in. E&O insurance covers professional mistakes (disclosure failures), while general liability covers physical injuries (office accidents).
LEARN MORE ABOUT E&O INSURNACE
If you're shopping for E&O insurance, these guides help you compare costs and find coverage for your industry:
What Does E&O Insurance Cover?
While E&O insurance provides financial protection when clients claim professional mistakes and negligence, it won't cover every business risk. Knowing what it does and doesn't cover can save you from costly surprises when you file a claim.
Professional Negligence | ✅
| You're an accountant who makes a tax calculation error that costs your client $12,000 in penalties |
Failure to Deliver Services | ✅
| You're a web developer who can't get your client's e-commerce site launched on time |
Giving Incorrect Advice | ✅
| Your investment recommendations don't work out, costing your client $50,000 |
Missing Deadlines | ✅
| You miss a crucial court filing deadline and your client loses their lawsuit |
Discrimination Claims | ✅
| A client sues you claiming your HR advice led to discriminatory hiring practices that got them sued |
Cyber Liability | ❌ | Hackers break into your systems and steal client data (you'll need cyber insurance) |
Bodily Injury | ❌ | Someone trips and falls in your office (that's what general liability is for) |
Intentional Wrongdoing | ❌ | You deliberately mislead clients about what you can deliver |
Criminal Acts | ❌ | Your employee steals money from client accounts (look into crime insurance) |
Property Damage | ❌ | Your equipment breaks something at a client's office (general liability covers this) |
How Much E&O Insurance Do You Need?
How much E&O coverage you need depends on your industry's risk level, annual revenue, client project size and state requirements. A financial advisor managing million-dollar portfolios needs more coverage than a freelance graphic designer, while a California real estate agent faces different risks than one in Montana.
Match your largest client contract or annual revenue (whichever is higher) to cover your biggest potential mistake. Look at your industry's typical claim amounts. For example, IT consultants could face claims of around $100,000, while financial advisors might see claims exceeding $500,000. Legal defense costs can easily reach tens of thousands of dollars, even if you win, so factor these into your coverage decision.
UNDERSTANDING YOUR E&O COVERAGE LIMITS
Errors and omissions insurance policies have two types of coverage limits that work together:
- Per occurrence limit: The maximum your insurer pays for a single claim.
- Aggregate limit: The total amount they'll pay for all claims during your policy period.
For example, if you have $1 million per occurrence and $2 million aggregate limits, your insurer pays up to $1 million for each claim, but no more than $2 million for the year. You're responsible for additional claims once you hit your aggregate limit until your policy renews.
Who Needs E&O Insurance?
Many professions require errors and omissions insurance as part of their licensing or regulatory requirements. But even if yours doesn't, investing in coverage is worth the cost if you provide professional services. The industries and professions that typically need this coverage include:
Financial Services | Financial advisors, insurance agents, accountants, tax preparers | Financial planning and providing investment advice can result in considerable losses. |
Real Estate | Agents, brokers, property managers, appraisers | Property disclosure issues and contract mistakes can cost clients thousands. |
Technology | Software developers, IT consultants, web designers, data analysts | System failures, security breaches, and missed deadlines can damage client businesses. |
Legal & Professional | Lawyers, consultants, architects, engineers, notaries | Professional advice and document preparation errors can have serious legal consequences. |
Health Care | Health care administrators, medical billing companies, telemedicine platforms | HIPAA violations and billing errors can result in regulatory fines and lawsuits. |
Marketing & Business | Marketing agencies, HR consultants, business coaches, event planners | Failed campaigns, hiring mistakes, and missed events can damage client reputations. |
E&O Insurance: Bottom Line
When clients sue over professional mistakes, E&O insurance pays your legal bills and settlements. It handles negligence and missed deadlines, but not cyber incidents or bodily harm. For financial advisors, real estate agents, IT consultants and accountants, it's the difference between surviving a lawsuit and losing everything.
Errors and Omissions Insurance: FAQ
We've gathered the answers to business owners’ frequently asked questions about errors and omissions insurance:
What is the difference between E&O and professional liability insurance?
E&O and professional liability insurance are different names for identical coverage. Both protect you when clients claim your professional services caused them financial harm. The key difference is from general liability, which covers bodily injuries and property damage.
How much E&O insurance do small businesses need?
You'll want coverage that matches your largest client contract or annual revenue, whichever is higher. A financial advisor managing million-dollar portfolios needs more protection than a freelance designer. Since legal defense alone can cost tens of thousands, don't skimp even if you're confident you'll win.
Do contractors need E&O insurance?
Yes, especially if you provide design services, project management or technical consulting. Contractors benefit from combining E&O with general liability coverage. While general liability covers jobsite injuries, E&O protects you when design errors, missed deadlines or faulty recommendations cost clients money.
What is the cheapest E&O insurance?
Low-risk professions like notaries and freelance writers pay much less than high-risk industries like financial advisors. To find cheaper E&O insurance rates, choose higher deductibles, buy only required coverage limits, bundle with general liability and maintain a clean claims history. Online insurers often beat traditional agents.
Can I get E&O insurance if I've been sued before?
Yes, but expect higher premiums and possible coverage exclusions for similar claims. Insurers will ask about your claims history during the application process, so don't lie or they'll void your policy. Shop around since different insurers have varying appetites for risk and previous claims.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.