What is Errors and Omissions Insurance (E&O)?

Thang Truong
Thang Truong
Updated on:

Errors & omissions insurance (E&O) is another name for professional liability insurance. Some people use the terms interchangeably, but they differ a bit in what professions they cover. Errors and omissions insurance typically covers:

If you are a healthcare professional, you’ll want malpractice insurance, and if you’re a lawyer, a consultant, engineer, or architect, you’ll call it professional liability insurance

What does Errors and Omissions Insurance (E&O) Cover?

Errors and omissions insurance will protect you against lawsuits filed by customers accusing you of a mistake or negligence. Errors and omissions insurance is necessary for any profession which has specialized knowledge and either gives advice or provides a service. 

For example, say you’re an insurance agent and you sell a customer a policy. Due to an error you make, the customer pays an extra $150 a month for years before they notice. This person could sue you for this money, plus any court costs and legal fees. 

You don’t even have to technically make a mistake to get sued. In the previous example, let’s say you explain to the customer that an Indexed Universal life policy can earn them a return on their investment, but there are risks and a return is not guaranteed. Your customer eagerly buys the policy. Then the stock market takes a nosedive and your customer loses money. He might sue you because he’s angry he lost money, even though you did explain to him that there were no guarantees. The case will probably be dismissed in court, but you would still have to pay court costs and legal fees. Errors and omissions insurance will cover those costs for you. 

How Much is Errors and Omissions Insurance (E&O)?

The type of business you’re in will affect how much you’ll pay for E & O insurance. According to Insureon, the median average cost of a policy is about $713 a year. They break it down by industry (keep in mind these are median averages):

  • Building design: $1,705 a year
  • Marketing and media: $845 a year
  • IT: $730
  • Real estate: $665
  • Consulting: $650
  • Insurance professionals: $550
  • Accounting: $400

Other factors affecting how much you pay for E&O insurance could include your location, how many employees you have and if you’ve ever filed a claim before. 

In order to get a cheap E&O insurance policy, be sure to shop around with a few companies or with a digital broker like CoverWallet or SimplyBusiness to compare several quotes before making your final decision.

>>MORE: Errors and Omissions (E&O) Insurance Costs by Professions

How Much Errors and Omissions Insurance (E&O) do I Need?

You can buy a policy for anywhere from $250,000 to $2 million. Many customers buy a $1 million/$1 million policy, which means they have a million dollars for any single claim and a million dollars annually. 

How to Purchase Errors and Omissions Insurance?

If you’re interested in buying errors and omissions insurance, it’s very easy. Most large companies offer this insurance, and many have online quoting. Shop around and get quotes from at least three companies. Or, you could use an online insurance broker to get quotes for you. Consider raising your deductible to save money. When you find a policy that meets your needs, you can usually buy it online. 

>>MORE: The Best E&O Insurance Companies

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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