Errors and Omissions Insurance (2024)

FAQs

What does errors and omission insurance not cover? ›

E&O insurance policies doesn't cover acts, omissions, or negligent acts related to employment. It also doesn't cover workplace injuries. It exclusively covers issues related to professional services rendered to clients.

As a business owner, you can face a lawsuit at any time. That's why you'll want errors and omissions coverage. This will help pay your legal fees if you're sued for mistakes or errors in your services. It's also important to remember that customers can sue you even if you didn't make a mistake or error.

An employment dispute, such as a claim of sexual harassment, wrongful termination, workplace discrimination, and other similar claims, are not covered under your E&O policy. They may be covered under Employment Practices Liability insurance (EPL).

An E&O certificate provides proof of insurance

When your business secures an errors and omissions (E&O) insurance policy, you'll receive a certificate of insurance. This certificate contains key information about your E&O policy and provides proof of insurance to your clients and licensing boards.

Dishonest, Intentional, Malicious or Criminal Acts

While E&O policies cover negligent acts, errors and omissions, they generally exclude claims arising out of dishonesty, intentional wrongdoing or criminal acts.

Understanding Errors and Omissions (E&O) Insurance

It protects companies against the full costs of a claim made by a client against a professional who provides advice or a service such as a consultant, financial advisor, insurance agent, or lawyer.

How much is errors and omissions (E&O) insurance? Average costs for E&O coverage for small business owners ranges from $500 to $1,000 per employee, per year. So, if your business has 50 employees, you can estimate your errors and omissions premium to be between $25,000 and $50,000 annually.

FAILURE TO OBTAIN/MAINTAIN PROPER COVERAGE

For P&C agents, this is the most common source of E&O claims. When a client doesn't receive the coverage they requested or expected, they look to the agent for relief. A lack of a thorough risk analysis is often the root cause of these problems.

The Average Cost of Errors and Omissions Insurance

Most small businesses pay between $500–$1,000 per employee per year for errors and omissions insurance, landing the average around $750 a year.

Errors and omissions insurance (E&O) is used by professional service providers to protect them from lawsuits and financial losses over claims of unsatisfactory work. This includes those who offer professional advice, such as realtors, insurance professionals, tax preparers, and IT professionals.

Which of these situations is most likely to be covered by E&O insurance? ›

E&O insurance will often help cover defense expenses that result from a claim made against you or your business by a client or customer who is unsatisfied with your services due to an error or mistake.

There are two types of deductibles available from most E&O providers. One type is the first-dollar-defense (FD) deductible, where the deductible applies only to actual paid claims, so the agency pays nothing until the claim is settled or a judgment is rendered.

Understanding the standard of care required of insurance agents, acting within the scope of an agent's training and experience, and always documenting insurance conversations, meetings, and transactions are the three most important things an agent or CSR can do to avoid being faced with an E&O claim.

To prevent this scenario, minimize the number of agents working with the same client. Fewer people means fewer breaks in communication where errors could occur. In addition, have the client and the agent double-check their information to ensure everything is as it should be.

Sometimes projects go over budget or require more work than initially agreed upon. If a breach of contract results in a lawsuit from the client, your E&O policy can help cover the legal expenses and resulting judgment or settlement.

E&O insurance does not cover bodily injury or property damage. As mentioned above, you generally obtain this policy to cover the gaps included in the general liability insurance policy, which already covers bodily injury and property damage.

Technology errors and omissions insurance and cyber insurance both cover data breaches. The type of coverage your business needs depends on whether a cyberattack could damage your company, your clients, or both.