Errors and Omissions (E&O) Insurance
What is errors and omissions insurance?
Errors and omissions (E&O) insurance covers a business when a client claims that a mistake, missed deadline, or inadequate advice caused a financial loss. It is the common name for professional liability insurance outside of medicine. It typically covers legal defense costs and covered settlements, up to the policy limit.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that keeps premium, retention, and claim-related costs in separate accounts, so the true cost of risk is easy to see.
What it typically covers
- Negligence or errors in the services the firm provides
- Missed deadlines or failure to deliver as promised
- Defense costs, even when the claim turns out to be unfounded
It usually does not cover intentional wrongdoing, bodily injury, or property damage. Most E&O policies are written on a claims-made basis.
How to record it
The figures below are illustrative. A firm pays a $7,200 annual premium and carries a $5,000 retention. It records the premium as a prepaid expense and expenses $600 a month. If a covered claim arises, the firm pays the first $5,000 and the insurer handles covered costs above that, up to the limit. The firm expenses its $5,000 when incurred and considers whether any unresolved claim is a contingent liability.
Who needs it
Consultants, accountants, agencies, technology firms, insurance agencies, and property managers all face claims based on advice or services. Many client contracts require proof of E&O coverage, so firms often need a certificate of insurance on file.
Frequently asked questions
Is E&O the same as professional liability?
For most purposes, yes. E&O is the term used by many non-medical professions, while professional liability or malpractice is used by lawyers, doctors, and others. Policy wording differs by insurer, so compare coverage, exclusions, and limits rather than the name.
Do I need E&O if I already have general liability?
Usually yes. General liability covers physical injury and property damage, but it generally does not cover financial losses caused by your professional advice or work. A business that sells expertise or services typically needs both policies.
This page is general information, not insurance advice. Talk with a licensed broker about your coverage needs.