No matter how careful your team is, every business that provides expertise or services faces the risk of being accused of making a mistake. A client could claim your work was wrong, incomplete, or failed to deliver results, even if you did everything right.

Errors & Omissions (E&O) insurance, also known as professional liability insurance, protects your company from those claims. It covers legal defense, settlements, and judgments when a client alleges your professional services caused them financial harm. For businesses built on trust, accuracy, and deadlines, E&O coverage is a crucial safety net.

What Is Errors & Omissions Insurance?

E&O insurance covers claims that arise when your work or advice doesn’t meet expectations whether due to an error, oversight, or alleged negligence.

It protects professionals and companies that sell services, expertise, or advice, such as consultants, SaaS providers, designers, financial advisors, engineers, or life sciences firms.

If a client sues, claiming your work was incorrect or late and caused them to lose money, your policy can cover your attorney’s fees, court costs, and settlements (up to your limit). Even meritless claims can be expensive to defend.

E&O is similar in purpose to medical malpractice or legal malpractice insurance but tailored for modern service-based businesses.

What Does Errors & Omissions Insurance Cover?

E&O insurance protects your company when a client alleges that your professional services or advice caused them financial loss. It generally covers four core areas:

• Legal defense costs: Lawyers, court fees, and arbitration costs, often in addition to your policy limit so legal expenses don’t erode your available coverage.
• Settlements and judgments: The amount you owe if a court rules against you or you agree to settle a claim.
• Professional errors or negligence: Protects against mistakes, missed deadlines, or failure to meet professional standards.
• Financial losses to clients: Unlike general liability, E&O covers economic damages, not physical injury or property damage.

For example, if your software update deletes a client’s sales data, or your consulting recommendation leads to lost revenue, E&O insurance may cover the resulting legal and financial fallout.

What Errors & Omissions Insurance Doesn’t Cover

While broad, E&O coverage doesn’t apply to every kind of risk. It usually does not cover:

• Bodily injury or property damage (covered by general liability)
• Fraud or intentional misconduct
• Employee lawsuits (covered by EPLI)
• Cyberattacks or data breaches (covered by cyber insurance)
• Intellectual property disputes unless endorsed
• Guarantees or contract performance promises beyond standard negligence

If your business faces risks in these areas, like handling sensitive data or managing employees, your broker can help bundle E&O with Cyber, EPLI, and General Liability policies for comprehensive protection.

Learn more about what E&O Insurance covers and doesn't cover.

Who Needs Errors & Omissions Insurance?

Any business that provides advice, expertise, or services for a fee should carry E&O coverage. That includes:

• Technology companies (SaaS, developers, IT consultants)
• Professional services (consultants, designers, accountants, marketers)
• Healthcare and life sciences (biotech, clinical services, lab testing)
• Financial services and venture firms (advisors, fund managers)
• Real estate and other licensed professionals (brokers, engineers, lawyers)

If a client could claim your mistake cost them money, you need E&O insurance. In some industries, like real estate, healthcare, or investment advisory, regulators may require it for licensing.

How Much Does Errors & Omissions Insurance Cost?

Premiums vary widely depending on your industry, size, and risk profile. High-risk or heavily regulated companies may pay more than other industries.

Several factors influence cost:

• Industry and services provided: High-stakes sectors (finance, healthcare, tech) carry more exposure.
• Revenue and headcount: Larger operations mean more clients and potential claims.
• Coverage limits and deductible: Higher limits cost more but provide broader protection.
• Claims history: A clean record lowers premiums.
• Bundled coverage: Combining E&O with cyber or general liability can reduce costs overall.

In most cases, a $1M policy provides meaningful protection at an affordable rate for small and mid-market firms.

Learn more about Errors & Omissions Insurance costs.

How Much Errors & Omissions Coverage Do You Need?

E&O policies are usually written with two limits:

• Per-claim limit: The most your insurer will pay for one claim
• Aggregate limit: The total they’ll pay for all claims during the policy period

A $1M/$1M policy is a common starting point for small firms but isn’t appropriate for every company.

When setting limits, consider:

• Client contracts: Many specify required minimums (e.g., $1M or $2M).
• Worst-case scenario: Estimate how much a major mistake could cost a client.
• Growth trajectory: As you take on larger clients or projects, revisit your limits annually.
• Industry benchmarks: Financial, healthcare, and SaaS companies often carry higher limits due to regulatory and data risks.

If your primary insurer can’t provide high enough limits, excess or umbrella coverage can add another layer of protection.

Learn more about how much Errors & Omissions insurance you need.

Errors & Omissions Claim Examples

While every scenario is different, here are instances where E&O insurance may help protect you:

Software Failure

A SaaS startup releases an update that unintentionally corrupts customer data. A client sues for lost sales and revenue.

Consulting Error

A strategy firm recommends new equipment to improve a manufacturer’s efficiency. Instead, the equipment causes downtime and lost profits.

Missed Deadline

A fintech company fails to deliver a promised system integration on time, causing its client to lose a contract.

Lab Testing Mistake

A biotech lab’s test results include an error that leads to costly retesting and client losses.

Why Errors & Omissions Insurance Matters

For most service-based businesses, your reputation and relationships are your greatest assets. E&O insurance protects both.

Even one lawsuit, justified or not, can cost hundreds of thousands in legal fees and settlements. With E&O in place, you have a defense team and financial protection that ensures a single mistake doesn’t threaten your company’s future.

It’s not just coverage for when things go wrong; it’s a signal to clients and investors that you take your responsibilities seriously.

E&O insurance safeguards your company against the financial consequences of mistakes, missed deadlines, or claims of bad advice, helping you focus on doing great work while knowing your risks are covered.

Frequently Asked Questions

Is E&O the same as professional liability insurance?‍

Yes. The terms are interchangeable. “E&O” is often used in tech, finance, and consulting, while “professional liability” is common in legal and healthcare fields.

Does E&O cover cyber risks?‍

Sometimes. Most cyber-related losses require a separate Cyber Liability policy, but because there is overlap these policies can work together and some Tech E&O policies bundle both.

Does E&O cover physical damage or injuries?‍

Typically not. That’s what General Liability is for.

Do I need E&O if I use strong contracts or disclaimers?‍

Yes. Even with good contracts, you can still be sued. E&O ensures your defense and potential settlements are covered.

When should I buy E&O insurance?‍

As soon as you have clients or users relying on your product or advice. Many investors and enterprise clients require proof of coverage before signing deals.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.

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