Insurance Curator Professional Liability Insurance, commonly called Errors & Omissions (E&O) insurance in the United States, protects professionals and firms against claims of negligent acts, errors, or omissions in the performance of professional services. Despite being a fundamental part of risk management for many service businesses, E&O is surrounded by persistent myths that lead firms to underinsure — or skip coverage entirely. Below, insurance experts debunk the top myths, explain what really matters, and provide concrete pricing examples for U.S. markets so you can make informed decisions.
Quick definitions (core fundamentals)
- Professional Liability / E&O: Coverage for claims alleging professional negligence, mistakes, or failure to deliver agreed services.
- Typical limits: Most small firms buy $1,000,000 per occurrence / $1,000,000 aggregate (written as $1M/$1M).
- Who needs it: Consultants, technology firms, accountants, advertising agencies, real estate professionals, architects, engineers, and many more. See Who Needs Professional Liability Insurance (Errors & Omissions)? A Guide by Profession for role-specific guidance.
Myth 1 — "My general liability policy covers professional mistakes"
Reality: General Liability (GL) covers bodily injury and property damage, not professional errors. GL explicitly excludes professional services claims in most policies. If a client sues because your advice allegedly caused financial loss, you need E&O. For a primer on triggers and policy mechanics, read How Professional Liability Insurance (Errors & Omissions) Works: Coverage Triggers and Policy Basics.
Why this matters:
- Lawsuits for alleged faulty advice are often high-cost even if baseless — defense costs alone can exceed $50,000 quickly.
- A GL-only approach leaves a gap that many clients and contracts require to be filled by E&O.
Myth 2 — "E&O is only for big firms or high-risk professions"
Reality: Small businesses and sole practitioners are frequently targeted by claims. E&O premiums scale with risk factors (industry, revenue, claims history), so many small firms can buy basic coverage affordably. According to industry summaries, small professional firms commonly pay in the low hundreds to a few thousand dollars per year for $1M/$1M coverage, depending on profession and state. (See Sources.)
Common low-cost candidates:
- Independent consultants, marketing agencies, freelance designers, and IT consultants often find entry-level E&O policies accessible and recommended.
Myth 3 — "If I have no claims history, I don’t need E&O"
Reality: Lack of past claims does not eliminate future risk. Many firms with clean records are sued after a single dissatisfied client or due to an error in deliverables. E&O covers defense costs and settlements that can threaten cash flow or force bankruptcy.
Real-world point:
- A single client claim alleging missed deadlines or incorrect deliverables can trigger legal defense costs in the tens of thousands before settlement negotiations begin.
Myth 4 — "E&O covers every business mistake"
Reality: E&O covers professional negligence, not every business error. Typical exclusions include willful wrongdoing, criminal acts, contract penalty clauses, and bodily injury/property damage (unless specifically endorsed). Read policy wording carefully and consult with a broker to confirm whether cyber-related or intellectual property exposures need separate endorsements or policies.
Myth 5 — "A client’s contractually required limit is always necessary"
Reality: While many clients specify minimum limits (commonly $1M/$1M or higher), blindly agreeing to extremely high limits without pricing analysis can be costly. Negotiate terms, get quotes for different limits, and consider buying an initial limit that satisfies most clients — then purchase excess coverage or higher limits as needed for large, high-risk contracts.
Typical U.S. Pricing — Examples by company and city (estimated)
Pricing varies by revenue, profession, claims history, and jurisdiction. The table below gives typical market ranges for $1M/$1M E&O policies from established carriers for small firms in major U.S. cities. These are estimated ranges based on public rate guides and company product pages; use them as starting points for budgeting.
| Company | Sample entry-level price (annual) | Typical range for small professional firm (NYC / Los Angeles / Chicago / Houston / Miami / San Francisco) |
|---|---|---|
| Hiscox | $350–$600 | $350–$1,200 (Hiscox advertises low-cost E&O for small businesses; final cost varies by state and profession) (Hiscox) |
| The Hartford | $500–$1,200 | $500–$2,000 (often depends on industry and revenue) (The Hartford) |
| Travelers | $600–$1,500 | $600–$2,500 (larger underwriting appetite for specialty professions) |
| Market average guidance (small firms) | $400–$1,500 | City premiums trend higher in NYC, San Francisco, and Los Angeles due to litigation exposure and higher revenue profiles |
Notes:
- These figures are estimates for the U.S. market and assume no prior claims and modest annual revenue (e.g., <$1M). Higher revenue or specialized risk (software development, medical services, engineering) increases premiums materially.
- Costs are sensitive to state laws (e.g., New York malpractice climates vs. Texas), and to whether you need claim-made vs. occurrence forms.
How claims-made vs. occurrence forms change things
- Claims-made: Most E&O policies are claims-made — they cover claims first reported during the policy period (or an extended reporting period if you have retroactive date). This makes continuity and retroactive dates critical.
- Occurrence: Rare for professional liability; covers acts that occur during the policy period regardless of when reported.
If switching carriers, confirm retroactive dates and tail coverage pricing — tail endorsements can cost 100%+ of your annual premium for several years of coverage.
Practical buying tips (U.S. market-focused)
- Get multiple quotes (at least 3) from reputable carriers or brokers familiar with your profession.
- Confirm whether your client contracts require additional insured wording, limits, or specific carriers.
- Evaluate deductible vs. premium trade-offs. Small deductibles lower out-of-pocket defense costs.
- Ask about endorsements for cyber liability, intellectual property defense, and subpoena defense if relevant to your practice.
- For detailed fundamentals and key terms, see What Is Professional Liability Insurance (Errors & Omissions)? A Clear Definition for Professionals.
Quick checklist before binding a policy
- Confirm policy form: claims-made with retroactive date matching your start of operations
- Verify limits meet client contract requirements
- Understand exclusions and any required endorsements
- Compare quoted defense handling practices (duty to defend vs. reimbursement)
- Ask about multi-year tail pricing if switching carriers
Sources and further reading
- Hiscox — Errors & Omissions Insurance: https://www.hiscox.com/small-business-insurance/errors-and-omissions-insurance
- The Hartford — Errors & Omissions Insurance: https://www.thehartford.com/errors-and-omissions-insurance
- NerdWallet — Errors and Omissions Insurance Cost Guide: https://www.nerdwallet.com/article/small-business/errors-and-omissions-insurance-cost
By separating fact from fiction and understanding how E&O works in specific U.S. cities and industries, professionals can buy the right protection without overpaying — and avoid the true cost of being underinsured: an uninsured claim that bankrupts your business.