Insureon Blog

Professional liability vs. errors and omissions insurance

23. April 2015 08:07

Two identical businessmen

Insurance lingo isn't easy to understand, especially when some policies have multiple names. Such is the case with professional liability insurance, also known as errors and omissions insurance. These names are interchangeable and used to describe the same policy, so why does it have two names? And what does the policy do? Let's get to the bottom of both these questions.

Protection for professional services

Businesses that provide professional services (e.g., consulting, troubleshooting, or installation) often want an E&O policy because those services come with special liabilities. Namely, you can be sued over:

If these professional mistakes result in a financial loss for your client, the client could sue your business to recoup expenses. That's where professional liability / errors and omissions insurance comes in. This policy can help cover:

Even if there was nothing wrong with the quality of your work, a difficult or dissatisfied client can sue your business over a perceived problem. That means you'll likely win the case if it goes to court, but you'll still have to pay for a legal defense and court costs. Without E&O insurance, that could represent a major financial difficulty for your business.

The good news is that E&O / professional liability insurance may offer coverage for your legal expenses even if the lawsuit is frivolous. A meritless suit may waste your time, but it doesn't have to drain your resources, too. Read more about that here: "Why winning an E&O lawsuit still costs money."

To find out how much professional liability insurance costs, check out our professional liability insurance cost report.

E&O, professional liability, or malpractice: What's in a name?

Now you may have a better grasp of what professional liability insurance does, but why does it have so many names? In short, different industries have adopted different names for this coverage over the years. It helps to discuss the policy by the name businesses are familiar with:

These aren't hard-and-fast rules, though. Many industries use the terms E&O and professional liability insurance interchangeably. What's important to remember is that it means the same thing: coverage for claims related to your professional work or advice.

Lastly, keep in mind that clients may require you to have this policy in place before they hire you. In their eyes, the policy vouches that their investment won't be wasted. If the job doesn't go as planned, E&O insurance offers them a way to recover their losses.

In that sense, having E&O or professional liability insurance can be a good marketing tool for your business and help distinguish you from competitors. Learn more about that in "Why clients want you to have an E&O policy."

Updated March 28, 2019


Errors and Omissions Insurance | Insurance Terms Explained | Professional Liability Insurance

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