Who needs errors and omissions insurance?
Errors and omissions insurance (E&O) is your business's best defense against accusations of mistakes or oversights.
E&O insurance covers lawsuits over the quality of your work
You’re an expert in your field and your services are extremely valuable to your clients. Yet those same clients may sue over a perceived mistake or oversight, even if you didn’t do anything wrong. That’s why you could benefit from errors and omissions (E&O) insurance.
E&O helps cover legal costs if a client sues over:
- Poor advice
- Negligence
- Missed deadlines
- Undelivered work
- Work that didn’t meet expectations
- Breach of contract
Technology companies, consultants, media and advertising businesses, building design professionals, real estate and insurance agents, and other professional services companies should look into E&O. In your industry, you may also see the policy referred to as professional liability insurance.
E&O insurance protects you and your clients
Several states require minimum errors and omissions insurance coverage for specialized professionals, including those in financial services and real estate. The average E&O insurance cost is about $61 per month. Many clients will also want to make sure you're covered before signing a contract with you.
Having an E&O policy protects both you and your client from financial loss. If something goes wrong, your insurance company will cover the client's losses.
Does your company handle data? You likely need tech E&O
A data breach or cyberattack can have a serious impact on your bottom line.
Massive breaches get the most attention, but small businesses aren't immune from the risk. Small businesses have been the victims of 38% of data breaches, according to Verizon's 2024 Data Breach Investigations Report.
That’s why small tech companies should seriously consider technology errors and omissions insurance (tech E&O) as well. It combines the benefits of an E&O policy with the added protection of cyber insurance.
Cyber liability insurance comes in two forms: first- and third-party coverage.
Companies that store data look to first-party cyber insurance
If you store client or customer data on your servers, first-party cyber liability insurance should be at the top of your list. This coverage will pay for:
- Cyberextortion ransoms and legal fees
- Customer notifications
- Credit monitoring services or anti-fraud protections
- Crisis management services
- Costs of investigating the attack
Companies at risk of data breach lawsuits look to third-party cyber insurance
Third-party cyber liability insurance can help pay your legal costs if a client holds you responsible for compromised data. It will cover the cost of:
- Hiring an attorney
- Settlements
- Court-ordered damages
- Regulatory investigations
- Fines and penalties
Tech E&O includes both first-party and third-party cyber coverage – along with everything that errors and omissions insurance offers. It’s the ideal package for most tech pros.
Who benefits the most from tech E&O insurance?
IT consultants
IT consultants recommend new software for clients, help put it in place, and train people how to use it.
If something goes wrong with that software or it doesn't help the client in the way expected, the client could sue the consultant for lost time and resources, or to recoup fines or other costs.
If a data breach happens in a cloud service that you recommended, for instance, your client could sue you for putting their data at risk.
Tech errors and omissions insurance will help with costs associated with a lawsuit if a client isn't satisfied with your professional advice.
Data scientists
Data scientists process information and provide data-driven insights for their clients. Clients rely on that advice to chart the course of their business.
But if a client makes a decision that doesn’t turn out as expected, they could blame the data scientist for the results – even if it wasn’t their fault.
If the data scientist doesn't have tech E&O insurance, they'll be left to pay for all the legal expenses and damages on their own.
Cybersecurity professionals
Cybersecurity professionals protect their clients from cyberattacks. If an attack happens, clients could sue the cybersecurity company for not adequately protecting them or acting fast enough to minimize the security breach.
A technology errors and omissions insurance policy would pay for legal costs and any kind of settlement or judgment from a lawsuit.
Advertising agencies, digital marketers, and other tech professionals
Your clients come to you as an expert in your field and they have certain expectations. But even a capable professional can run into unexpected problems, or give advice that doesn’t pay off.
Let's say you run a advertising agency. A client comes to you looking for help organizing their contact database. You recommend a new CRM and marketing automation software for the client and help them make the switch. A year later, the client decides the new software was a waste of money and sues you for negligent advice.
If you have E&O, your insurer will cover your legal defense costs as long as they're within your policy limits. That includes settlements, court costs, judgments, and whatever else it takes to resolve the suit.
How much E&O coverage do you need?
TechInsurance customers pay an average of $67 a month for tech E&O insurance, but errors and omissions costs vary depending on the services you offer and how much data you handle. Companies that take on more risk may pay more to make sure they're protected.
The most popular policies have a $1 million per-occurrence limit and a $1 million aggregate limit. Boosting those limits means more coverage.
Make sure to keep this policy active. It’s a claims-made policy, which means you can’t cash in on a claim unless both the incident and the claim happen while the policy is active.
Remember, the cost of being sued when you don’t have errors and omissions coverage is much more than what you'll pay in premiums.
E&O should be one of the first things you discuss with your insurance broker (right after general liability coverage) when starting a business.
Do you still need an E&O insurance policy if you’re careful?
You don't have to be guilty of negligence or bad work for errors and omissions insurance to make sense. If an unhappy client makes a false accusation and sues, you'll still have to pay a lot in legal fees to defend yourself in court.
That’s why you should consider this coverage even when it’s not required. No tech company is immune to liability claims.
If you’re not sure which type of insurance policy you need, our licensed TechInsurance agents can help you find the right coverage.
And if you are ready to buy E&O insurance, fill out our free online application to get quotes from top insurance companies today.
