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Errors and Omissions Insurance
Protect your company against lawsuits for mistakes and oversights.
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Errors and omissions insurance

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Errors and omissions insurance (E&O)

Errors and omissions insurance, also called professional liability insurance, protects your business when a client sues over a mistake or oversight – whether or not it was your fault.

Does your company need errors and omissions insurance?

The fact is, you might earn a living off your expertise – but it could also put you in the crosshairs of a client lawsuit. Any business that provides advice or services should consider errors and omissions insurance.

Business owner weighing insurance risks and options

E&O insurance covers:

  • Work errors and oversights
  • Undelivered services
  • Incomplete work
  • Missed deadlines
  • Budget overruns
  • Breach of contract
  • Accusations of negligence

Most tech businesses buy technology errors and omissions insurance (tech E&O). It includes cyber liability insurance to help pay costs from data breaches and cyber incidents at your business.

If a client blames your business for failing to prevent a data breach, tech E&O covers those costs as well. And legal expenses can be steep even if you win.

The good news is, tech E&O coverage is affordable. TechInsurance customers pay about $60 per month for this policy.

What does errors and omissions insurance cover?

Unhappy customers are a fact of life in business. But when a customer claims your mistake or negligence cost them money, you may end up in court.

An E&O policy, also called professional liability insurance, protects your company from the high costs of a lawsuit. It covers:

  • Legal defense costs
  • Court-ordered judgments
  • Settlements
  • Court costs
If a client sues, the costs can do serious damage to your small business – whether or not you’re at fault.

Let’s say a customer hired an IT project manager to oversee the implementation of a new ERP system, but missed several project deadlines and the targeted completion date. The client filed suit, claiming this breach of contract caused them significant financial harm. An E&O insurance policy would pay for the project management firm’s legal fees and eventual court settlement.

Or imagine an IT consultant recommends a cloud storage service provider to a client, which turns out to be riddled with performance issues and lacks basic features like file sync and file sharing. The client sued the IT consultant to recover damages. E&O insurance would pay for legal costs and any judgment.

Read more about errors and omissions insurance coverage.

What errors and omissions insurance doesn't cover

E&O insurance doesn't cover every risk. For instance, you may also need:

Who needs errors and omissions coverage?

Any company that provides a service to a client can be accused of inferior work or miss a deadline due to unexpected delays. If a client sues, the costs can do serious damage to your small business – whether or not you’re at fault.

That’s why E&O/professional liability insurance is crucial for technology and software businesses:

Bottom line, any small business owner that provides professional services could benefit from this policy. And that’s doubly true if your mistake could cause a client financial loss.

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Female tech business owner giving client professional advice
Who needs errors and omissions insurance?

Errors and omissions insurance (E&O) is a tech expert's best defense against accusations of mistakes or oversights.

How much does errors and omissions insurance cost?

Business owner thinking about cost factors

Most tech business owners choose tech E&O, which has a median cost of $59 per month, or $708 per year. But you could pay more or less depending on your risks.

The cost of E&O depends on:

  • Your location
  • Your profession’s level of risk
  • Your coverage limits and deductible
  • Number of employees
  • Past liability claims
  • Cyber risks (for tech E&O)
View Costs

Why is it important to keep your E&O insurance policy active?

It’s tempting to drop your business insurance once you stop working for a client, get a full-time job, or retire, but for E&O that’s a big mistake. Errors and omissions insurance is a claims-made policy. That means you’re only covered if your insurance policy was active both when an incident happened and when the claim was filed.

For example, say an IT consultant buys E&O for coverage when helping a client try and win a big grant. The consultant lets the policy lapse after the client submits a grant application. Three months later, the grant is denied. If the client sues the consultant, the insurance company won’t help since the policy expired.

That’s why it’s crucial to keep this type of insurance active – even when you think you no longer need it.

Luckily, if you need coverage for past events, you have options. Ask your insurance company about setting a retroactive date for coverage when you apply.

Updated: June 29, 2022