Understanding the differences between errors and omissions and general liability insurance is crucial for startups to ensure comprehensive protection against the distinct operational and professional risks they face.

Coverage and common claims

Errors and omissions (E&O) insurance protects against claims arising from professional mistakes, service failures, or product defects that cause financial harm to clients, such as software bugs preventing customer transactions or negligent service delivery. General liability insurance covers bodily injury, property damage, and personal injury claims that occur during regular business operations, including customer slip-and-fall accidents or damage to third-party property caused by your products.

When you need each

E&O insurance becomes essential as soon as you launch your product and begin serving customers, particularly for service-based businesses or companies providing professional advice where mistakes could lead to client financial losses. General liability insurance is foundational coverage needed from day one of operations, especially if you have a physical location, interact with customers in person, or manufacture products that could potentially cause harm.

Typical coverage limits

Both E&O and general liability policies typically offer coverage limits ranging from $1 million to $5 million per occurrence, with aggregate limits often being double the per-occurrence amount. The specific limits you choose should align with your industry risk profile, company size, and potential exposure to claims.

Understanding professional vs. operational risks

E&O insurance specifically addresses the professional aspects of your business operations. If you're a fintech company and a software glitch prevents users from executing trades during market hours, resulting in investment losses, E&O coverage would handle the resulting lawsuits and legal defense costs. This type of coverage is particularly vital for technology companies, consultants, and service providers where professional judgment and expertise directly impact client outcomes.

Physical and product-related protection

General liability insurance takes a broader approach, covering the everyday operational risks that any business faces. Whether it's a delivery driver causing property damage, a customer getting injured at your office, or your product causing physical harm after purchase, general liability steps in to manage these claims. This coverage also extends to advertising-related personal injury claims, such as accusations of copyright infringement in your marketing materials.

Complementary coverage strategy

Rather than viewing these as competing options, most startups benefit from having both types of coverage as they address different risk categories. E&O protects your professional reputation and handles claims related to your expertise and service delivery, while general liability provides the foundational protection against everyday business operational risks. Together, they create a comprehensive insurance framework that addresses both the intellectual and physical aspects of business risk. The scenarios described are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the standard form of policy for a description of the scope and limitations of coverage.

What does errors and omissions insurance not cover?

E&O insurance does not cover bodily injury, property damage, or personal injury claims that occur during regular business operations. It also doesn't cover intentional wrongdoing, criminal acts, employment practices violations, or cyber liability issues. Additionally, E&O typically excludes coverage for contractual disputes, warranty claims, and damages to your own work or products.