E&O Insurance Covers claims of negligence, mistakes, or failure to deliver promised services. It’s especially important for consultants, advisors, and other service-based professionals.
Errors & Omissions (E&O) Insurance
What Is E&O Insurance?
Errors & Omissions Insurance (E&O) is a form of professional liability insurance that protects businesses and professionals from claims of negligence, mistakes, or failures to deliver promised services. If a client alleges that your work caused them a financial loss — whether or not the claim is valid — E&O insurance covers legal fees, settlements, and defense costs.
Who Needs E&O Insurance?
In service-based industries, small errors can result in significant financial damage to clients. Without E&O coverage, a single lawsuit could cost your business thousands — or even millions — in legal expenses. E&O protects your business’s reputation, financial future, and ability to continue operating while managing claims.
Common industries that often require E&O Insurance include:
- Consultants and advisory firms
- Financial professionals
- Marketing and design agencies
- Software developers and IT consultants
- Real estate agents and brokers
- Event planners
- Anyone providing professional services or advice
What Does E&O Insurance Cover?
E&O Insurance typically covers:
- Legal defense against claims of errors or omissions
- Alleged breach of contract or failure to perform
- Professional negligence
- Misrepresentation
- Incorrect advice
- Claims arising from missed deadlines or deliverables
What Doesn’t E&O Insurance Cover?
While E&O Insurance offers broad protection, it doesn’t cover:
- Bodily injury or property damage (covered by General Liability)
- Intentional wrongdoing or fraud
- Employment disputes (see EPLI)
- Cyber incidents (see Cyber Liability or Tech E&O)
- Claims made outside of the policy period
- Services provided without proper licensing
How Much Does E&O Insurance Cost?
The cost of E&O Insurance varies based on factors like business size, industry, location, and claims history.
Key Cost Factors:
- Industry risk level
- Revenue and number of clients
- Contract size
- Claims history
- Policy limits and deductibles
Typical Cost Range:
- Small businesses: $500–$2,000/year
- Mid-sized firms: $2,000–$10,000/year
- Large-scale consulting: $15,000+/year
- High-risk Businesses: $15,000+/year
Risk Management Tips
To minimize potential claims:
- Clearly define scopes of work in all contracts and client agreements.
- Maintain thorough documentation of all client communications, changes, and approvals.
- Use standardized procedures and checklists to reduce human error.
- Train employees regularly on client service, compliance, and documentation protocols.
- Implement quality control and peer-review systems for client deliverables.
- Regularly review service descriptions and marketing materials to avoid overpromising.
Talk to An Expert
Our dedicated experts are ready to provide tailored insurance solutions to clients across a wide range of industries and specialized services.
Schedule a consultation to see how Alliance Risk can reduce your insurance risk.
– We look forward to partnering with you.