Skip to content
× FreshBooks App Logo
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:

Errors and Omissions Insurance (E&O): Definition & Meaning

Updated: February 20, 2023

No one is perfect and no business is perfect. You can do everything in your power to ensure certain things are organized properly and as accurate as possible. But, there can be times when something gets overlooked or included by mistake. It’s never done on purpose, yet some mistakes or errors can have substantial consequences for businesses. 

They could lead to a loss of profits, for example, even though the mistake was made harmlessly. This is why there are certain types of insurance coverage to help protect you and your business. One of these is Errors and Omissions Insurance (E&O). Read on to learn more about how it works and what it covers.

List IconTable of Contents


    • Errors and omissions insurance is a type of professional liability insurance.
    • It protects businesses and professionals from financial losses.
    • These losses are specific to errors or omissions in their work.

    What Is Errors and Omissions Insurance (E&O)?

    The insurance industry is dynamic and volatile. Financial risk is inherent in any business venture. But the insurance industry faces unique challenges due to its sensitive nature. As a result, there are many different types of insurance to safeguard businesses from unforeseen events.

    E&O Insurance is also known as Errors and Omissions Insurance. It is a type of liability insurance. It protects professionals such as accountants, auditors, consultants, and attorneys from financial loss. These losses are negligence or wrongful acts committed while performing their respective services.

    E&O protects businesses and professionals from financial losses arising from errors or omissions in their work.

    This business insurance is important for businesses or individuals that provide professional services. It can help protect them from the financial damages that can result from mistakes or negligence.

    As you continue reading this article, you will learn why E&O Insurance is essential for your accounting firm. If you’re a business owner, this information is highly important. So keep reading to get the answers to these questions and more.

    Fresh Starts Deserve FreshBooks

    Errors and Omissions Insurance Importance

    E&O insurance is important because it can help protect you from financial losses that can occur as a result of errors or omissions in your work.

    This type of insurance can help cover the costs of legal fees and settlements. Essentially, any expenses related to lawsuits alleging that you made a mistake in your work.

    What Does Errors and Omissions Insurance Cover?

    E&O insurance typically covers the cost of defending against a claim, as well as any damages awarded to the claimant. For example, omissions coverage usually includes:

    Bodily Injury: This includes coverage for any physical injuries that occur as a result of your work.

    Attorney Fees: If you’re sued for an error or omission in your work, your E&O policy can help cover the costs of your legal defense.

    Settlements: If you’re found liable for damages, your E&O policy can help pay for any settlements awarded to the plaintiff.

    What Errors and Omissions Insurance Doesn’t Cover?

    Errors and omissions insurance does not cover intentional acts of fraud or criminal acts. Such purposeful wrongdoing isn’t covered. Moreover, if you have a history of liability claims, you may have a hard time getting E&O insurance coverage.

    It’s important to note that E&O insurance policies often have exclusions for certain types of risks. For example, environmental contamination or pollution. You’ll want to speak with your insurance agent to make sure E&O insurance meets your needs.

    Get A Headstart On Your Accounting

    Who Needs Errors and Omissions Insurance (E&O)?

    Businesses and professionals providing professional services may need errors and omissions insurance policies. Traditional liability insurance only covers so much, such as direct damages. 

    One of the main benefits E&O insurance provides is its legal protection. If you have a lawsuit against you the insurance company will cover the court costs. 

    While E&O insurance is a form of liability insurance, it has perks not offered by standard business liability insurance

    Some common examples of those that may need E&O insurance include:

    • Lawyers
    • Accountants
    • Architects
    • Engineers
    • Real estate agents
    • Insurance agents

    If you’re not sure whether this insurance is right for you, you should talk to your financial advisor. They can give you insurance advice regarding this insurance package. 

    Example of Errors and Omissions Insurance

    For example, let’s say you are a real estate agent. You neglect to inform your client of a material defect in the property they are interested in purchasing.

    If the buyer decides to sue you for damages, your E&O insurance would likely cover the cost of defending against the claim. Also included are any damages awarded to the claimant.

    Although there are coverage limits, you do have a guarantee of coverage against such conflicts.


    A business with errors and omissions insurance has protection against certain liabilities. You can ensure your company’s security with E&O insurance.

    Hit The Ground Sprinting

    FAQs About Errors and Omissions Insurance

    Who pays for errors and omissions insurance?

    The company pays for the insurance, but the insurance company pays for legal expenses.

    Does errors and omissions insurance cover negligence?

    Yes. This is one of the primary benefits of E&O insurance.

    What is the difference between professional liability and errors and omissions insurance?

    E&O insurance is also known as professional liability insurance.

    What is the difference between general liability and errors and omissions insurance?

    General liability covers lawsuits, advertising injuries, and property damage. E&O business insurance covers just the lawsuits resulting from financial losses.

    Is E&O covered under umbrella?

    You can extend your coverage to maximize your limits. This is similar to an umbrella plan with traditional liability insurance.


    553 HRS


    $ 7000




    Try It Free for 30 Days. No credit card required. Cancel anytime.