If your work is your product, advice, design, code, financial guidance, marketing strategy, you need professional liability insurance, also called errors and omissions (E&O). Unlike general liability, which covers physical injury and property damage, E&O covers economic loss to your client when something you did, said, or failed to do causes them money.
Claims-made vs. occurrence: the most important distinction
Almost all E&O policies are claims-made, meaning they cover claims reported during the policy period for work done after the retroactive date. If you cancel without buying tail coverage, claims that emerge later are uncovered. General liability is usually occurrence-based and pays regardless of when the claim is reported. Understanding this difference can save you a six-figure surprise.
Retroactive date and prior acts coverage
When you switch carriers, ask the new insurer to match your existing retroactive date and provide prior acts coverage. Otherwise the gap between policies is uninsured. Most claims emerge 1 to 3 years after the work was done, exactly when a coverage gap hurts most.
Tech E&O for SaaS and agencies
Standard E&O usually excludes data breach, system downtime, IP infringement, and defamation. Tech E&O bundles all of those plus cyber liability into a single product. For any business that touches client data or delivers software, tech E&O is the right product.
Defense-inside-the-limits trap
Some policies include legal defense costs within the policy limit. A $1M policy that spends $400k on defense leaves only $600k for settlement. Look for defense-outside-the-limits or duty-to-defend wording, both of which preserve the full limit for indemnity.
Quick comparison
| Profession | Typical limit | Annual premium |
|---|---|---|
| Solo consultant | $1M / $2M | $400 to $1,200 |
| Marketing agency (5 staff) | $1M / $2M | $1,200 to $3,500 |
| SaaS startup | $2M / $4M tech E&O | $2,500 to $6,000 |
| Real estate broker | $1M / $1M | $500 to $1,500 |
| Financial advisor | $1M / $2M | $1,500 to $4,500 |
Key takeaways
- Almost all E&O policies are claims-made, meaning they cover claims reported during the policy period for work done after the retroactive date.
- When you switch carriers, ask the new insurer to match your existing retroactive date and provide prior acts coverage.
- Standard E&O usually excludes data breach, system downtime, IP infringement, and defamation.
Final word
Insurance is at its best when you understand the product before you need it. Bookmark this guide, share it with anyone shopping for professional liability (e&o) insurance this year, and reach out via our contact page if you have a question we have not answered.
Related reading on InsureLab
Sources & further reading
Frequently asked questions
Is professional liability the same as general liability?+
No. GL covers bodily injury and property damage. E&O covers economic loss from professional advice or services.
How long do I need to keep an E&O policy after I retire?+
Buy tail coverage (also called extended reporting period) for at least 3 to 5 years to cover claims that emerge after you stop working.
Does my E&O cover work done by subcontractors?+
Sometimes, with proper endorsement. Always require subcontractors to carry their own E&O and be named as additional insureds where appropriate.
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