ANSWER: Errors and Omissions Insurance (E&O) is insurance that protects the insured for claims by clients for professional advice or products sold that lead to negligence and financial losses. Errors and Omissions Insurance is also known as Professional Liability Insurance.


E&O or Errors and Omissions insurance can be purchased by professionals such as insurance agents, brokers and dealers, financial planners, consultants, etc. to avoid bearing the full cost of defense in the event of a negligence claim. 


Defense Costs Can Hurt Business


Lawsuits will happen when finances are involved, no matter how baseless the claim may be by the client. An example of a claim would be when a client loses money from an investment that has been recommended by a broker or advisor, even though the client knew the risks ahead of time. However, even if the defendant has won in favor of the court or arbitration panel, the costs of defense and time spent defending against this claim is high and disruptive to business. Also, with more claims against a person or company, there will be a higher underwriting risk and increase the cost of errors and omissions insurance.