FAQs on Errors and Omissions Insurance
1. What is Errors and Omissions Insurance in simple words?
Errors and Omissions Insurance (E&O), also called Professional Indemnity Insurance, protects you if a client claims that your advice, service or work caused them a financial loss. It covers legal expenses, court costs and compensation if you are found liable.
2. Is Errors and Omissions Insurance mandatory in India?
It is not legally mandatory for most professions. However, some industries like medical practice, accounting, legal services and architecture strongly recommend it. Many international clients and corporate contracts also require service providers to have E&O Insurance before signing deals.
3. Who should buy Errors and Omissions Insurance?
Any individual or business that offers advice, consultancy, design, software, finance, legal or medical services should consider it. This includes IT companies, freelancers, architects, lawyers, audit firms, marketing agencies, consultants and doctors.
4. What types of mistakes does E&O Insurance cover?
It covers financial loss caused by:
- Incorrect advice or miscalculation
- Missed deadlines or incomplete work
- Errors in reports, designs, tax filings, or software code
- Failure to deliver promised professional services
- Employee mistakes that affect clients
5. Does it cover fraud or criminal acts?
No. E&O Insurance only covers unintentional mistakes, negligence or oversight. If a professional deliberately cheats, lies or commits fraud, the insurer will not cover them. However, legal defence costs are covered until guilt is proven.
6. Does Errors and Omissions Insurance cover data breaches or hacking?
Not under a standard policy. Data breaches, cyberattacks or ransomware incidents are covered under a separate Cyber Liability Insurance policy. If a client sues because of a cyber-related service failure, you need both E&O and cyber insurance.
7. Does it cover physical injury or property damage?
No. E&O only covers financial loss due to professional mistakes. Physical injury or property damage is covered under General Liability Insurance or Workmen Compensation Insurance, not E&O.
8. Will past mistakes be covered after buying the policy?
Only if the policy has a retroactive date. If your policy allows “full retroactive cover,” it covers past work as long as no claim or legal notice was raised before the policy start date.
9. Does it cover freelancers and small agencies?
Yes. Freelancers, consultants and small service firms are often the most vulnerable to unexpected legal claims. E&O Insurance is available even if you're a one-person company.
10. What happens when a client sends a legal notice?
You must immediately inform your insurer or broker. They will guide you on how to respond, appoint a legal expert if necessary, and start the claim process. If you ignore or delay reporting, the claim can be denied.
11. What is the difference between Errors and Omissions Insurance and General Liability Insurance?
General Liability Insurance covers physical injury or property damage caused to a third party (for example, a client slipping and getting injured in your office). Errors and Omissions Insurance covers financial losses caused due to mistakes in your professional service, advice, design or work. They protect against completely different risks.
12. Does Errors and Omissions Insurance cover refunds or unhappy clients?
No. If a client is simply unhappy with your work and asks for a refund—but cannot prove financial loss or negligence—it is not covered. E&O applies only when a client suffers measurable financial damage due to your mistake or failure to deliver agreed services.
13. Can I buy E&O Insurance after a mistake has already happened?
No. If you already know about a mistake, dispute or have received a legal notice before buying the policy, insurance won’t cover it. E&O only protects against unknown and future claims. This is why professionals often buy it before signing major contracts.
14. Does the policy cover subcontractors or consultants working for me?
Only if they are specifically included in the policy as “insured persons”. Otherwise, claims caused by contractors or freelancers may not be covered. If your work involves outsourcing or subcontracting, it’s important to add them to the policy or get a contractual indemnity agreement.
15. How long does E&O Insurance provide protection if I stop working or close my business?
You can opt for run-off cover or an extended reporting period (ERP). This allows you to report claims even after your business shuts down or after a project ends, as long as the mistake was made during the policy period. This is especially important for doctors, architects, lawyers or retired consultants.
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