Errors and omissions Insurance, often called E&O insurance, is a type of professional liability coverage designed to protect businesses and individuals against claims of inadequate work or negligent actions. Understanding the typical costs, what drives pricing, and what E&O insurance covers is essential for professionals who may be at risk for these types of claims.
Who This Policy Is For & Eligibility
Errors and omissions insurance is most relevant for professionals providing advice or services, including consultants, real estate agents, insurance brokers, financial advisors, IT contractors, and similar occupations.
Eligibility criteria generally include running a qualifying business, operating in regulated industries, or performing billable client work where contractual liability is possible.
Highly regulated professions or those required by law or contract to carry professional liability insurance (like many healthcare, financial, and real estate professionals) are primary candidates.
Some policies may have minimum revenue or client count qualifications. Policies may be offered to individuals, sole proprietors, partnerships, firms, and corporations.
Certain fields—such as architects, engineers, or legal professionals—often require specialized professional liability coverage with additional endorsements or higher limits tailored to their risks.
Key Facts (At-a-Glance)
Item
Details
Coverage Types
Professional liability for errors, omissions, or negligence in service/advice to clients.
Typical Premium
Average for small businesses: $78/month or about $931/year (2026 estimate; see source 1). Sole professionals often see premiums between $400 and $1,200/year (source 2). Figure varies with profession, size, and risk profile.
Deductible
Common deductible range: $500 to several thousand dollars per claim; set at policy inception.
Cyber liability, disciplinary proceedings, crisis management may be offered as add-ons.
Claims
Made on a “claims-made” basis; must have active coverage when the incident and claim occur.
Waiting Period
No typical waiting period, but retroactive date and prior acts coverage vary by carrier.
Renewal Requirements
Annual underwriting review; continued eligibility based on risk profile/business conduct.
Pros
Protects against client lawsuits alleging professional mistakes, errors, or omissions.
Coverage for legal defense costs, settlements, and judgments—even if a claim is groundless.
Often required by clients, regulators, or contracts—improves business credibility.
Customizable with endorsements and higher limits to suit specialty risks.
Typically covers both the entity and individual employees/contractors under the policy.
Cons
Does not cover intentional wrongdoing, criminal acts, or bodily injury/property damage (unless specified).
Premiums may increase after claims or with business growth (revenue, exposure, number of professionals).
Claim denials possible for late reporting, policy exclusions, or fraud.
Some policies exclude prior acts or “known claims” before the coverage start date.
Deductibles and policy limits may result in significant out-of-pocket expenses for large claims.
Costs & How Pricing Works
Typical costs for errors and omissions insurance (E&O) in 2026:
Small business average: about $78/month or $931/year (illustrative; see MoneyGeek study, source 1).
Sole professionals: generally $400–$1,200/year (source 2).
Premium is determined by:
Business type/industry (higher-risk professions such as financial, legal, or design fields often pay more).
Claims history and prior E&O losses.
Revenue, number of employees/partners, and scope of work.
Coverage limits and deductible selected.
State/local legal environment, regulatory requirements, and market competition.
Years in business and experience level.
Some insurers offer discounts or credits for no-claim histories, risk management training, or bundled policies (not guaranteed).
Most policies are written on a “claims-made” basis; maintaining continuous coverage is crucial since retroactive claims may be excluded if a gap occurs.
Covered Services & Exclusions
E&O policies generally cover:
Financial loss claims by clients due to alleged errors, negligent advice, or professional mistakes in the normal course of doing business.
Negotiated settlements, judgments against the insured, and attorney fees/incurred legal defense costs.
Claims arising from contracts (unless excluded), misrepresentation, and failure to deliver promised services.
Standard exclusions typically include:
Intentional illegal acts, fraud, criminal conduct, or personal gain outside approved business activities.
Physical injury or property damage (covered under separate general liability insurance).
Slander, libel, copyright infringement (unless policy is endorsed for media/intellectual property risks).
Prior known claims or incidents pre-dating coverage’s retroactive date.
Contractual liability not arising from professional services.
Waiting periods and retroactive coverage terms vary by insurer.
Endorsements and riders (for cyber, regulatory, or disciplinary exposures) may be available at extra premium.
Claims & Appeals
Promptly report all potential claims or incidents to your provider—timeliness is crucial with “claims-made” E&O coverage.
Insurer assigns a claims adjuster or legal team to review documents, contracts, and correspondence related to the alleged error or omission.
Legal defense and settlement are generally managed by the insurer up to policy limits after deductible is met.
If a claim is denied due to an exclusion or contract dispute, appeal procedures involve submitting further documentation or explanations per carrier guidelines.
Some unresolved claims may be eligible for mediation or review by a state department of insurance; check your local DOI’s consumer resources (see official DOI homepage or NAIC consumer resources (official) for escalation pathways).
Quotes & Cost Drivers
Coverage limits (per-claim and aggregate annual limits)—higher limits mean higher premiums.
Deductible selected—a higher deductible generally results in a lower premium.
Professional background, experience, and number of claims or complaints.
Field of work—professions with higher frequency/severity of claims pay more.
Revenue, annual client count, and risk exposures (complexity of services, contractual requirements).
Policy length (annual, multi-year), retroactive coverage (“prior acts”), and choice of optional endorsements.
Discounts for risk management, bundled coverage, or group purchasing may be available but not guaranteed.
Coverage Optimizer Checklist
Assess the professional risks unique to your field and required by your contracts/clients.
List essential coverage limits for both per-claim and aggregate annual incidents.
Identify any endorsements (cyber liability, disciplinary action, subpoena assistance) necessary for your operations.
Review policy exclusions and sublimits—are there gaps for specific professional actions?
Analyze deductible vs liquidity; set one you can reasonably manage if a claim occurs.
Ensure accurate business description and list of covered activities at application; material misstatements may void coverage.
Alternatives & Comparisons
Side-by-Side Comparison
Feature
E&O (Errors & Omissions)
General Liability
Professional Indemnity (Specialized)
Coverage Scope
Claims for professional mistakes, errors, omissions, or negligent advice
Varies widely; higher for regulated/complex professions
Deductible
$500–$2,500 (sample)
$250–$1,000 (sample)
$1,000+ often (sample)
Exclusions
Intentional acts, physical damage, prior claims
Professional services, advice, errors/omissions
Profession-specific; check endorsements
Claims Process
Claims-made; report during coverage period
Occurrence-based; report anytime after covered incident
Varies: claims-made for most professional risks
State Rules & Regulatory Notes
No federal mandate for E&O coverage, but state regulations or professional boards may require it for certain licensed occupations (such as real estate or insurance agents).
Some contracts (private or government clients) require evidence of E&O/professional liability insurance as a condition of doing business.
State insurance department (DOI) or the NAIC consumer resource portals can provide guidance on E&O regulations or complaint escalation. See NAIC consumer resources (official).
Coverage forms and required minimums vary; always check with state DOI or review your business’s licensing body guidelines.
Frequently Asked Questions
What professions need errors and omissions insurance?
Professions providing specialized advice or technical services—consultants, insurance agents, real estate brokers, accountants, legal, design and tech professionals.
Requirements vary by industry and sometimes by state or licensing board.
Some client contracts require E&O regardless of regulatory mandate.
Why do premiums vary so much for E&O coverage?
Risk profile, business type, and previous claims/losses are major influences.
Amount of coverage, deductible, and optional endorsements also impact annual cost.
State location and local legal climate contribute to price variation.
Is errors and omissions insurance required by law?
Not for all professions, but some—such as insurance agents and realtors—may be required by state law or regulatory boards.
Client contracts may require proof of coverage as a condition to do business.
Always verify with your state DOI or relevant professional board.
How does the “claims-made” policy form work?
A claim must be both made and reported while the policy is active (including retroactive period, if applicable).
Letting coverage lapse can void protection for past work if a claim arises after expiration.
“Prior acts” coverage, if included, covers incidents before the active policy start date.
What’s the difference between errors & omissions and general liability insurance?
E&O covers professional mistakes or bad advice that cause financial loss; general liability covers third-party bodily injury or property damage.
Some businesses may need both types of coverage for comprehensive protection.
General liability won’t cover professional errors or contractual disputes.
Conclusion & Next Steps
Errors and omissions insurance is essential for a wide range of professionals, particularly those offering technical, advisory, or client-focused services. Typical premiums for 2026 are approximately $931 per year for small businesses and $400–$1,200 annually for sole professionals, with rates depending heavily on occupation and business size.
Always compare your options, assess your coverage needs, and consult your state insurance department or professional licensing board for any mandatory requirements or minimums for your field.
For official licensing, complaint, and consumer protection resources, visit your state insurance department (official homepage) or the NAIC consumer resources (official).
Important
This content is for educational purposes only. It is not insurance, legal, or tax advice.
Policy terms, eligibility, premiums, and coverage limits vary by state and insurer—always verify with official sources and current-year documents.
