Errors and Omissions (E&O) Insurance
If a client claims your advice, your product or your service caused them a financial loss, Errors and Omissions insurance covers the legal defense and any settlement, even if the claim turns out to be groundless.
For financial services firms—from RIAs to fintech platforms—whose business depends on delivering advice, reports, recommendations, or other professional services, Errors & Omissions (E&O) insurance serves as a critical safeguard. It helps protect your company from the financial impact of claims arising from alleged mistakes, omissions, or unmet client expectations.
What is E&O insurance?
Errors and Omissions insurance, also called professional liability insurance, protects your company when a client alleges that a mistake, an omission or a failure to deliver a promised service caused them financial harm. It covers legal defense costs, settlements and judgments related to the professional services your company provides to others for a fee.
Unlike General Liability, which covers bodily injury or property damage, E&O covers financial loss caused by the work itself, bad advice, a missed deadline, an inaccurate report, a service that fell short of what was promised.
Who needs E&O insurance?
Any financial services firm that provides a service, advice or a work product to clients for a fee, including:
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Registered investment advisors, broker-dealers and financial consultants
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Companies providing compliance, HR or administrative services on behalf of financial services clients
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Fintech and insurtech platforms
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Asset managers and hedge funds
What does errors and omissions insurance cover?
Claims alleging financial loss from inaccurate advice, analysis or reporting
Failure to deliver a contracted service as promised
Misrepresentation of your product's or service's capabilities
Negligence in the performance of professional duties
Legal defense costs, even when the underlying claim is later found to be without merit
What is not covered by E&O insurance?
Bodily injury or property damage (covered under General Liability)
Intentional misconduct or fraud
Criminal acts
Claims arising from services performed outside the scope of your business
Employment related claims, such as wrongful termination or discrimination (covered under Employment Practices Liability)
Real-World Examples
Zenefits, an HR and benefits platform, promised its clients automatic compliance with state insurance licensing requirements. In 2017, New York's Department of Financial Services fined the company $1.2 million after finding it had allowed unlicensed brokers to sell insurance to its small business clients, a failure to deliver the compliance service the company had marketed.
Source: New York State Department of Financial Services, reported by Reuters/Fortune, "More Trouble For Zenefits Over Unlicensed Insurance Sales," published April 11, 2017.
Is E&O insurance worth it?
For any financial services firm that gets paid for advice, analysis or a service outcome, yes.
A single E&O claim, even a groundless one, still requires a legal defense, and those costs alone can reach well into six figures before any settlement is discussed. E&O is also increasingly a condition clients set before signing a contract, particularly enterprise clients and anyone operating in a regulated financial industry.
E&O vs. Tech E&O: Which one do you need?
E&O and Tech E&O both protect against claims that your work caused a client financial harm, the difference is in what triggered the claim.
E&O insurance
Responds when a client alleges your professional advice, analysis or service fell short, a bad recommendation, an inaccurate report, a missed deadline.
Responds specifically when your software, platform or technology failed to perform as promised, a bug, an outage, a system error that caused the client a loss.
Most fintech and financial technology companies carry both, because a single incident can touch on both fronts.
If your product is software, a platform, or a technology service, visit our Tech E&O Insurance page to see coverage built specifically for technology failures. If your company is paid for advice, analysis or a service outcome rather than a piece of technology, this page covers what you need.