Errors and omissions insurance is professional liability insurance for businesses. E&O insurance covers claims arising from unintentional mistakes or negligence, typically for businesses that provide advice or professional services. The cost of E&O insurance averages $400 to $1,000 per year depending on several factors, such as industry type and coverage limits.
Top Errors and Omissions Insurance Providers
|The Hartford||Customized E&O insurance policies for multiple business types and professions.|
|Insureon||Online-based insurance broker that provides access to multiple insurance carriers.|
|Nationwide||Small business owners that want a large provider and access to a local agent.|
|Hiscox||Large insurance provider with quick and easy application process.|
|Progressive Commercial||Small businesses that need basic E and O coverage and other insurance types.|
The best errors and omissions insurance providers to consider using for your small business will have a combination of qualities, including large company for financial soundness, fast claims service, and a history of providing commercial insurance products and services to small businesses.
Here are details on five E and O insurance providers that we researched:
1. The Hartford
The Hartford is a large, nationwide provider that has a long history of working with small business owners to get the insurance coverage they need. The Hartford’s errors and omissions insurance, which they offer as Professional Liability Insurance, is specialized by industry types and professions that need E&O coverage, such as technology, real estate, law firms, accounts, consultants and more.
E&O insurance coverage will be unique to each business type and profession. For this reason, The Hartford is a good choice for small business owners who will benefit from customized errors and omissions insurance packages to cover their unique risk exposures.
Insureon is a commercial insurance agency and brokerage that works with top-rated insurance companies to provide the coverage that best fits the needs of the business owner. Insureon has only been around since 2011, but they have already served 200,000 clients and have become a leading online provider of small business insurance.
Insureon can be a smart choice for small business owners who want quick and simple service with an online broker. Working with a broker allows for multiple quotes at one provider to get the best fit for your needs.
Nationwide is a large national insurance provider with a broad network of local agents for those business owners who prefer personalized service near their place of work. Nationwide, known for their property and casualty insurance, also offers errors and omissions insurance for professionals who need it, from lawyers and accountants to printers and personal trainers.
Nationwide is the best provider for small business owners who want to work with a large insurance company but also have access to a local agent for service. Their primary lines of insurance offerings include general liability, commercial property, and commercial auto.
Hiscox is a large insurance provider, but you might not notice that fact by the simplicity of their online application process. All of our top errors and omissions insurance providers offer quality service, but Hiscox focuses on a streamlined, online application process. You can start quickly by selecting your state and profession and follow prompts from there.
Hiscox can be a smart choice for small business owners who want a large insurance provider that makes it easy to get a quote online. Hiscox also clearly states what’s included and what’s not included in the policy to remove any confusion.
5. Progressive Commercial
Progressive Commercial is best known for their personal and commercial auto insurance, but they offer most of the policy types small business owners need, including errors and omissions insurance, through their Progressive Advantage Business Program.
Progressive offers standard errors and omissions policies that cover what most small businesses need. Their primary E&O coverage types include negligence, legal defense costs, and copyright infringement.
What E&O Insurance Is
Errors & omissions insurance protects businesses and professionals that provide advice or services to clients for a fee. E&O insurance covers defense costs and settlement claims, up to the policy limit, on claims accusing you of mistakes, negligence or bad advice. Intentional acts and fraud are not covered in an E&O policy.
Not every business needs errors and omissions insurance, but any business that provides a service to a client for a fee should consider buying coverage. The most common professions that may need E and O insurance include accountants, architects, IT businesses, doctors and lawyers.
Here are some of the professionals that may need errors and omissions insurance:
- IT Business
- Personal Trainers
The common thread tying together all professions that should consider purchasing an E and O insurance policy is providing a service to customers for a fee. Also, when your service involves your advice or expertise in solving a problem, and a mistake in this regard can result in financial damage to your client, errors and omissions insurance should be considered.
What E and O Insurance Covers
E&O protects businesses against claims arising from their mistakes, negligence, or failure to deliver promised services. It’s important to note that these errors or omissions must be unintentional for E&O insurance to pay claims on the policy. These covered unintentional acts include misrepresentation, giving incorrect advice, and violations in good faith.
E&O insurance covers unintentional negligent acts, including:
- Misrepresentation: When a product, service, or feature is not delivered as promised
- Giving Incorrect Advice: Causing a client to lose profit due to incorrect advice
- Violation of Good Faith: Broadly defined, this can include any act of noncooperation with a client, such as withholding information, or failure to communicate
In summary, if your client accuses you of mistakes, errors, careless conduct, or incomplete work, they can sue you for damages, even if you never made a mistake. However, E&O insurance will still cover your defense and settlement cost as long as the act was not intentional.
Depending on your particular policy, you may also have the following acts covered:
- Copyright Infringement: Whether written material, logos, trademarks or software code, E&O insurance can protect you from claims of copyright infringement.
- Defamation: Some policies can cover accusations of written (libel) and spoken (slander) defamation, such as if you posted a blog article that makes negative accusations about a competitor.
E&O insurance offers liability coverage where other insurance types have gaps, according to Christopher Morea, Agency Director, Morea Agency:
“E&O protects professionals from negligent acts or subpar performance in their work. These acts would not typically be covered by Commercial General Liability because the actions of a professional are specifically excluded by most Commercial General Liability policies. However, E&O does not indemnify you from intentional acts, but it might defend you against the allegations of the claim.”
What E and O Insurance Doesn’t Cover
The most important to fact to remember about E&O insurance exclusions is whether or not your acts were intentional. If evidence surfaces that an act of negligence was intentional (say, an email that outlines a plan to defraud customers by selling them a nonexistent feature), this would be considered a criminal offense, and thus would not be covered by E&O insurance.
E&O insurance typically does not cover the following situations:
- Intentionally Illegal, Dishonest or Malicious Acts
- Bodily Harm or Damaged Property (this is covered by general liability insurance instead)
- Litigation from another insured person on your policy (e.g., if another member of your business sues you; this would be covered by D&O insurance instead)
- Wrongful acts or claims you reported under a previous policy
It’s important to understand that most E&O insurance policies are written on a “claims-made” basis, which means if a claim arises from work you performed before you obtained your E&O policy, you won’t be able to access your benefits.
However, depending on the policy you purchase, you may be covered for prior acts, which are negligent acts that occurred before coverage started but weren’t filed until later. This is why you need to pay close attention to the “retro date,” or retroactive date of inception. Provided the claim is filed after you buy coverage, any action that occurs after the retro date should be covered.
Errors and Omissions Insurance Cost
The cost of E and O insurance averages from a low end of $400 for low risk businesses, such as personal trainers, to $1,000 or more for higher risk professionals, such as doctors and attorneys. The wide range in cost for E&O insurance is due to various factors, including industry type, revenue and number of employees.
The primary factors affecting the cost of E and O insurance include:
- Industry: Higher risk of lawsuits increases premium. For example, architects may pay more than $1,500 per year in premium, whereas a financial services business averages $500 per year.
- Size of Business: Higher revenue and a larger number of employees increase your risk of liability claims, which will push costs of E and O insurance higher.
- Location of Business: The frequency and expense of lawsuits tends to be higher in some locations than others. For example, a lawsuit in New York is typically more expensive than one in Oregon.
- Claims History: If you’ve had E and O claims in the past, your rates will likely be higher.
- Procedures/Quality Control: The policies and procedures you have in place, such as employee training and customer satisfaction surveys, can reduce your chances of a claim. With lower risk of claims, insurance providers may offer premium reduction.
Tips on Applying for Errors and Omissions Insurance
The application process for most types of small business insurance is the same, at least in terms of the process of getting multiple quotes, choosing an insurance provider, and purchasing the policy. But when applying for errors and omissions insurance, it’s wise to address a few key points that are unique to the coverage.
Here are four key points to keep in mind when applying for errors and omissions insurance:
1. Gather the Right Documents Needed for E and O Insurance
When you’re ready to get quotes and apply for errors and omissions insurance, having the right documents ready will make the application process go more smoothly and will help to assure you get the appropriate coverage on your policy.
These documents will come in handy when completing your E and O application:
- Recent balance sheets and projections for the next fiscal year
- Service agreements and contracts you use with your largest clients
- Insurance policies or Certificates of Insurance for the coverages your business already carries
- Payroll sheets and documents detailing executive compensation
- Your business’ ownership interests in other companies
- The documents legally registering your company as a corporation, LLC, etc.
2. Decide Between Claims-Made Coverage and Retroactive Coverage
Most E&O policies are made on a claims-made basis, which means that in order for a claim to be paid, your policy must be active when the alleged incident first happened AND when the claim is filed.
For example, if an event happens while your policy is active, and a lawsuit is filed while it is still active, the policy will cover you. However, if the lawsuit from that event doesn’t occur until after you no longer have the policy, you won’t be covered.
It is possible for a claims-made policy to cover events that occurred before you purchased the E&O insurance policy. To get retroactive coverage, you may need to add some riders to the policy. Your policy may need some riders to get that kind of retroactive coverage.
3. Make Sure Your E and O Insurance Limit Is High Enough
The limit of your errors and omissions policy is important to consider before applying for and purchasing the policy. Depending upon the size of your business and the industry of your profession, a standard $1 million limit may not be enough. Consider the biggest risks to your business and determine how much of a financial hit you could take as a result of a mistake.
4. Make Sure Your Biggest Risks Are Included in the Policy
Since no E and O insurance policy is the same, it’s important that you review the policy with your agent or prospective insurance provider to make sure you understand what’s included and what’s not included (the exclusions). For example, policies may or may not offer coverage for certain risks, such as cyber liability, copyright infringement, or defamation. Make sure that you’re covered for what you need to be covered for before you agree to the policy.
Additional Types of Insurance You May Need
Errors and omissions insurance likely won’t be the only insurance type a small business owner needs. Therefore, if you’re looking for E and O insurance, there are probably other insurance types you are looking for, such as commercial general liability insurance, commercial property insurance or workers compensation.
There are at least three types of insurance you may need in addition to E and O coverage:
1. Commercial General Liability
Commercial general liability (CGL) insurance covers third-party bodily injury, property damage and related legal costs. Almost every business owner needs this coverage. If you work directly with the public, you’ll need a CGL policy because E and O insurance won’t cover accidents leading to injuries or property damage to third parties.
For example, if a client came to your office or building for a service you provide and was injured after slipping and falling over furniture in your front lobby, CGL insurance would help pay the medical bills and related legal costs, if a lawsuit ensued. E and O insurance would not cover this.
2. Commercial Property Insurance
Commercial property insurance protects your building and other assets against losses due to covered events like fire, theft, vandalism, and extreme weather. If you own a building or have valuable assets that would be costly to replace, property insurance is a must. If you lease space, you may still need this coverage, especially for your assets within the building.
For example, if you own or lease a building and a fire destroyed all of your equipment, machinery and supplies, commercial property insurance would cover the loss up to the policy limit.
3. Workers Compensation
Many companies that buy E and O insurance have employees, which means workers compensation will be needed. Required in most states if you have employees, workers comp insurance provides benefits to your employees in the event of work-related injuries or illnesses.
For example, if an employee becomes injured on the job, workers comp can cover medical bills, wages from lost work time, and more.
If you’re in the business of providing a service for a fee, you should carefully consider your need for errors and omissions insurance. When thinking about buying E and O insurance coverage, imagine what would happen if you made a mistake that caused financial damage to your client. If you fall into this category, you probably need E&O insurance. Get it today by speaking with an insurance agent or broker.