Home Insurance What is Errors and Omission Insurance?

What is Errors and Omission Insurance?


In the event of a claim accusing a business of making mistakes while offering a service, errors and omission insurance is the right coverage to save the company from the financial loss of a lawsuit. Before a company can be eligible for this policy, it must offer professional services to the public, such as health, legal, financial, etc.

E&O coverage can not be purchased by individuals who do not provide professional services. Errors and Omissions insurance covers hospitals or businesses with a professional obligation to patients and clients who may sue them for mistakes, failures, oversights, negligence, or malpractices arising from the services provided by the company or hospital.


To go further, we will look at other aspects of this coverage and learn more about it from the perspective of a business owner.


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What is another name for errors and omission?

In the insurance world, errors and omission insurance is also known as professional liability insurance. To further explain this coverage, professionals like doctors who perform surgeries and diagnoses, lawyers who offer legal advice services, financial entities and individuals who advise people concerning their money and investments, can purchase this coverage in case anything goes wrong.

This way, any claim that insists on a court case against these professionals will not result in any financial loss because the insurance company will take up the financial stress.

How the errors and omission insurance work

E&O majorly protects your company from clients’ claims in the face of unsatisfactory business transactions. Let us picture this example: a patient comes in for a diagnosis. Your hospital carries out numerous tests, comes up with a diagnosis, and provides a treatment option. The patient begins treatment, and while on the medication, the patient notices something else and decides to visit another hospital.


After similar tests, the hospital gave a different diagnosis. They contacted your hospital, and it was discovered that, out of negligence, your hospital provided the patient with the wrong diagnosis and wrong treatment, which caused another health challenge to the patient. For this reason, the patient dragged your hospital to court and sued for damages from negligence and mistakes.

So, when a company or business faces such a challenge, the E&O policy, which must be in force, by the way, may pay for the damages and cover other legal expenses that arise from the claim.

Who needs Errors and Omission Insurance?

Anyone or companies who deal with clients at a professional level, like:

  • Doctors and hospitals
  • Insurance brokers and insurance companies
  • Financial advisers and financial institutions
  • Wedding planners and wedding companies
  • Lawyers and Law firms
  • Engineers and Engineering companies

What is not covered by the Errors and Omission insurance?

Many liability claims are covered under errors and omission coverage for professionals in various business fields. However, this policy has a boundary and may not cover all aspects of your business.

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For example, errors and omission insurance coverage will not pay for claims from:

  • Fraud
  • Perils
  • Theft ( intellectual, data, or property )
  • Workplace injury or accident to employees
  • Property damage ( company, neighbors, or visitors )
  • Mortgage
  • Discrimination against clients or patients
  • Homes
  • Jewelry
  • Rentals
  • Equipment

Companies that provide this insurance offer unique policies and premiums depending on what they wish to cover. Each company operates separately, and you may not get the same policy when you change states.


To sum up, imperfection and mistakes are generally part of human nature. Not to encourage mistakes and disregard proper services but providing sensitive services to the public without purchasing errors and omission insurance coverage may be a bad decision. 



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