Professional liability insurance—commonly called Errors & Omissions (E&O) insurance—is essential for professionals who provide advice, services, or expertise. Even when you do everything right, clients can still claim that a mistake, oversight, or miscommunication caused them financial harm. E&O insurance protects you from the potentially devastating costs of these claims.
This article explains how professional liability insurance works, who needs it, what it covers, and how to choose the right policy.
What Is Professional Liability (E&O) Insurance?
Professional liability insurance covers claims that arise from errors, omissions, negligence, or failure to perform professional duties as expected. It applies when a client alleges that your work caused them financial loss.
Unlike general liability insurance, E&O focuses on professional services, not physical injuries or property damage.
Who Needs Professional Liability Insurance?
E&O insurance is critical for anyone who provides specialized knowledge or services, including:
Consultants and advisors
IT professionals and software developers
Marketing and advertising professionals
Accountants and bookkeepers
Real estate agents
Insurance agents and brokers
Architects and engineers
Healthcare and wellness professionals (non-medical malpractice)
If clients rely on your expertise, you’re exposed to professional liability risk.
What Professional Liability Insurance Covers
Errors and Mistakes
Coverage applies when a client claims your work contained an error, miscalculation, or oversight that led to financial loss.
Omissions
Failing to include critical information, missing deadlines, or overlooking key details can trigger E&O claims—even if unintentional.
Negligence Allegations
Claims that your services failed to meet professional standards are a common cause of lawsuits, regardless of whether negligence actually occurred.
Legal Defense Costs
E&O insurance covers:
Attorney fees
Court costs
Expert witness fees
Settlements or judgments
Defense costs alone can be financially devastating without coverage.
What E&O Insurance Does NOT Cover
Professional liability insurance typically excludes:
Bodily injury or property damage
Intentional wrongdoing or fraud
Criminal acts
Employee injuries
Contract disputes unrelated to professional services
Other policies are required to cover these risks.
Claims-Made Coverage Explained
Most E&O policies are claims-made, meaning:
The policy must be active when the claim is made
The incident must occur after the policy’s retroactive date
Canceling coverage without proper tail coverage can leave you exposed to future claims.
How Much Professional Liability Coverage Do You Need?
Coverage limits often range from:
$250,000
$500,000
$1 million or more
The right limit depends on:
Industry risk
Client size and contracts
Revenue
Regulatory requirements
Many contracts require minimum E&O limits to work with clients.
How Much Does E&O Insurance Cost?
Premiums vary based on:
Profession and risk level
Annual revenue
Claims history
Coverage limits
Deductible amount
For many professionals, E&O insurance is surprisingly affordable compared to potential legal costs.
E&O vs General Liability Insurance
General liability covers:
Bodily injury
Property damage
Advertising injury
E&O insurance covers:
Financial losses from professional services
Most professionals need both policies for complete protection.
Common Mistakes Professionals Make
Assuming “good work” prevents lawsuits
Relying only on general liability insurance
Choosing limits that are too low
Letting coverage lapse
Ignoring contract insurance requirements
Avoiding these mistakes is critical to long-term protection.
How to Choose the Right E&O Policy
Confirm your services are clearly defined
Match limits to contract requirements
Understand exclusions carefully
Check retroactive dates
Work with insurers experienced in your industry
Industry-specific E&O policies offer better protection.
Final Thoughts
Professional liability (Errors & Omissions) insurance protects your reputation, finances, and career. Lawsuits don’t require actual mistakes—only allegations. Without E&O coverage, defending yourself can cost far more than the policy itself.
If your income depends on your expertise, E&O insurance isn’t optional—it’s essential.