Do I Need Errors and Omissions Insurance?

Mistakes happen. But in business, even a small error or an accusation of professional negligence can escalate into a costly lawsuit that threatens your livelihood and reputation. Imagine facing a legal battle that drains your finances and jeopardizes everything you’ve built. 

So, how do you protect yourself and ensure your business can withstand these risks?

 The answer is errors and omissions (E&O) insurance. Also called professional liability insurance, this type of coverage protects businesses and independent professionals against claims of mistakes, professional negligence, misconduct, failing to deliver a service as promised, and misrepresentation. 

If you provide services or advice to your customers, it is vital to ensure that E&O insurance is included in your business insurance policy.

 A wide range of professionals can face E&O claims, including accountants, consultants, health and wellness practitioners, general contractors, and architects, can face allegations of negligence, or make an error that results in one of your customers suffering a financial loss.

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What Does an E&O Insurance Policy Not Cover?

For all that an E&O policy does cover, it may not cover all possible claims a business owner could face, including:

• Intentional or criminal acts and fraudulent behaviour
• Bodily injury and property damage claims caused by your regular operations
• Data breaches and cyber-attacks
• Intellectual property infringement
• Bodily injury and property damage claims caused by a product you sell

E&O Insurance vs. D&O Insurance: What’s the Difference?

Unlike errors and omissions (E&O) insurance, which covers business owners or independent professionals against professional negligence claims typically from a client, directors and officers (D&O) insurance is geared toward defending a board of directors for claims of wrongdoing from employees, shareholders, regulators, or creditors.

Think of it this way: E&O insurance protects a small business and its employees who directly provide goods and services to customers. On the other hand, D&O insurance, also known as management liability insurance, is designed to cover a company’s management team from claims such as investment decisions, employment-related lawsuits, or unfair business practices. If you’re a small business owner or an independent professional, you likely need E&O insurance, not D&O insurance.

Talk to a licensed broker about your small business and the possible liabilities you face to determine if adding D&O coverage to your policy makes sense. 

Is E&O Insurance Necessary for All Professionals?

Determining if you need E&O insurance comes down to what you do. 

In short, if you make a living off your expertise or if your business provides professional advice or services, it’s recommended you add this type of policy to your coverage. 

Even the most cautious, meticulous professional can make a mistake or be accused of a breach of contract. In other words, no professional is immune to a lawsuit merely by being careful. Furthermore, a Zensurance survey of Canadian consumers found most would sue a small business owner or independent professional if their services, a mistake, or an accident caused them physical or financial harm.

Suppose you are sued, but the court decides the allegations against you are frivolous and dismisses them. You’re still on the hook to pay for your legal defence, and that expense can run into tens of thousands of dollars.

How to Get Comprehensive, Low-Cost Errors and Omissions (E&O) Insurance Fast

If you’re going to err, err on the side of caution and get E&O insurance from Zensurance to protect your finances and reputation.

Fill out our online application for a free quote in just a few minutes.

With over 50 insurers in our partner network, we can get the comprehensive, low-cost policy your business needs, customize it to suit your specific requirements, and provide you with policy documents and a certificate of insurance.

– Updated December 16, 2024.