Updated: July 15, 2025
Advertising & Editorial Disclosure
Errors and omissions insurance gives you financial protection 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.
Due to high-risk decisions, financial advisors, real estate agents, IT consultants, and accountants benefit most from E&O coverage.
Errors and omissions insurance (E&O) provides your business with financial protection 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 use these terms interchangeably.
Besides E&O coverage, most businesses need other types of insurance coverage to to have comprehensive financial protection. Workers' compensation covers employee injuries, and commercial auto insurance protects company vehicles financially.
The two standard business insurance policies are errors and omissions insurance and general liability insurance:
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 |
Where did we get these rates?
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).
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) |
Figuring out 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 around $100,000, while financial advisors might see claims exceeding $500,000. Keep in mind that legal defense costs can easily reach tens of thousands of dollars even if you win, so factor these into your coverage decision.
Errors and omissions insurance policies have two types of coverage limits that work together:
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.
When you shop for E&O coverage, you choose the right protection level for your business.
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:
Industry | Professions | Why You Need E&O |
|---|---|---|
Financial Services |
| Financial planning and providing investment advice can result in considerable losses. |
Real Estate |
| Property disclosure issues and contract mistakes can cost clients thousands. |
Technology |
| System failures, security breaches, and missed deadlines can damage client businesses. |
Legal & Professional |
| Professional advice and document preparation errors can have serious legal consequences. |
Health Care |
| HIPAA violations and billing errors can result in regulatory fines and lawsuits. |
Marketing & Business |
| Failed campaigns, hiring mistakes, and missed events can damage client reputations. |
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.
We've gathered the answers to business owners’ frequently asked questions about errors and omissions 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.
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.
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.
Call your insurer immediately when you receive a lawsuit, demand letter, or notice of a potential claim. Most policies require notification within 30 to 60 days. Gather all relevant documents, including contracts, emails and project files, but don't admit fault or negotiate directly with the claimant.
Low-risk professions like notaries and freelance writers pay much less than high-risk industries like financial advisors. To find cheaper 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.
Without coverage, you're personally responsible for all legal costs and settlements. A lawsuit can drain your savings, threaten your home, and destroy your business. Even winning the case costs tens of thousands in legal fees, and some industries require E&O to maintain your license.
E&O premiums are generally tax-deductible business expenses for sole proprietorships, partnerships, and corporations. Your monthly premium reduces taxable income, effectively lowering the real cost by your tax rate. Keep detailed payment records and consult your tax advisor about your specific situation.
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!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
