Professional Liability insurance vs Errors and Omissions insurance

Professional liability insurance and errors and omissions insurance (also called E&O insurance) are different terms for the same type of insurance that offers financial protection for your business liability. They can both help protect businesses from the costs of legal claims and legal fees around mistakes in professional services that cause someone a financial loss. Which one to look for and buy to help cover your business depends on what the coverage is called for your profession.

Errors and Omissions vs Professional Liability: Are they the same?

Most of the time, professional liability insurance and errors and omissions (E&O) insurance refer to the same type of liability coverage most often sought after by professionals who sell their knowledge or professional services. This coverage can be required in some cases and in some states, either for licensing, for employment or it can be a mandate for some high-level clients.

There is typically no difference in the protection these two policies provide. The name for this type of business insurance often depends on the industry you work in or your insurance provider. That said, policy details can vary, so it’s important to review your coverage and exclusions carefully.

Professional liability or E&O insurance is common among businesses that sell their advice, expertise or professional services, such as real estate agents, consultants, accountants, etc. It could help protect your business if you’re accused of a professional mistake, professional negligence, oversight or omission that costs a client money or causes them financial harm.

Some examples where errors and omission coverage or professional liability could step in to protect you include:

• An accountant makes an computational error in financial reporting that affects a client’s business decisions**
• A consultant accidentally miss a deadline for a client that results in late fees or other financial penalties
• A real estate agent fails to reveal important property information that leads to a client’s financial loss
• An engineer’s professional recommendation for materials leads to a project failure that needs replacing and rebuilding — and you’re asked to pay the difference 

Read more examples of professional liability insurance claims.

Read more examples of errors and omissions insurance claims.

Who needs E&O vs Professional Liability insurance?

Professional liability coverage can be required by state law. Some licensed professions — such as real estate agents, healthcare professionals, attorneys or financial professionals — may be required to carry this type of coverage. Even when it’s not legally mandated, clients or contracts may require proof of this insurance coverage before you can begin work.

In general, licensed or credentialed professions are more likely to use professional liability, while consulting, tech and more transactional service industries often refer to it as E&O.

Here’s how the terminology is commonly used across industries:

If you make a professional mistake that leads to a financial loss for a client — or if a client alleges that you did and takes legal action against you — this coverage could help cover your business’ legal defense costs, attorney fees, court costs, settlements, judgments or other legal expenses tied to a negligence claim.

Professional liability or E&O insurance might help cover (actual or alleged):

• Business errors, oversights or omissions
• Missed deadlines or failure to deliver services as promised
• Inaccurate advice
• Misrepresentation or misleading information
• Professional negligence
• Legal defense costs
• Legal judgments or settlements

How much does Professional Liability or E&O insurance cost?

The cost of professional liability and the cost of an E&O policy depend on a number of factors, including your industry, the services you provide and your business’s overall risk profile. Many small service-based businesses find coverage to be more affordable than expected, especially when policies are tailored to their specific needs.

While pricing varies, it’s typically based on several factors such as:

• The type of work you do
• Your industry’s level of risk
• Annual revenue
• Claims history
• Number of employees
• Coverage limits and deductible
• Business location

Because every business is different, getting a quote based on your actual operations is the most accurate way to see your exact cost.

Since there isn’t a difference between a professional liability policy and E&O coverage besides industry terminology and how the policy is structured, businesses generally only need only one of these policies, not both.

If one of these policies is right for you, be sure to review the coverage details from your insurance company carefully to make sure it aligns with the services your business provides.

How ERGO NEXT helps protect small businesses with liability insurance

ERGO NEXT makes it fast, easy and affordable to protect your small business — and you can do it all online.

We’ll ask a few questions about your business and give you an insurance quote. You can select your insurance policy options and buy your coverage in about 10 minutes. Share your certificate of insurance at no extra cost, and you can access your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.