Errors and Omissions Insurance.
In plain English
Errors and omissions insurance, often shortened to E and O, protects you when a client claims your professional work caused them a financial loss. It is built for people who sell advice or services, like consultants, designers, accountants, and real estate agents. If a client says you gave bad guidance, missed a key detail, or failed to deliver what you promised, this policy can cover your legal defense and any settlement, even when you did nothing wrong. It does not cover physical injuries or damaged property, which is what general liability is for.
01Why it matters
Defending even a baseless claim that your work cost a client money can run thousands in legal fees, and one large settlement could otherwise wipe out a small service business.
02The math, step by step
A bookkeeping client misses a tax filing and blames a report you prepared. They sue for $25,000 in penalties and interest. Your errors and omissions policy pays for a lawyer and any settlement up to your limit, while you pay your deductible. Without it, both the legal bills and the payout come out of your own pocket. Typical E and O premiums for a small service firm vary widely by field, so the price comes from the quotes you gather from insurers.
03What this is NOT
Errors and omissions covers financial harm from your professional work or advice. General liability covers physical harm, like a client getting injured or their property being damaged. E and O will not pay if someone trips in your office, and general liability will not pay if your advice costs a client money.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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