Errors And Omissions Insurance - E&O

AAA

DEFINITION of 'Errors And Omissions Insurance - E&O'

A professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Errors and omissions insurance often covers both court costs and any settlements up to the amount specified on the insurance contract.

INVESTOPEDIA EXPLAINS 'Errors And Omissions Insurance - E&O'

E&O insurance can be obtained by insurance brokers/dealers, registered investment advisors and financial planners, among others. It is often required by regulatory bodies such as FINRA or company investors.

In the financial industry, lawsuits will happen, regardless on how baseless the claims may be. Clients sometimes sue an advisor or broker after an investment goes sour, even if the risks were well known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high and E&O insurance is vital in these situations. A person or company that has had numerous litigation problems has a higher underwriting risk and will find E&O insurance to be more expensive or less favorable in its terms as a result.

RELATED TERMS
  1. Honesty Bond

    A bond posted by an organization or professional insuring the ...
  2. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  4. Cooling-Off Rule

    A term referring to law pertaining to newly-entered contracts ...
  5. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
  6. Arbitration

    An informal hearing regarding a dispute. The dispute is judged ...
RELATED FAQS
  1. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Full Answer >>
  2. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  3. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  4. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  6. Is it more important to have a low deductible or a low premium?

    The choice between a low deductible or a low premium is a personal one. There is no right or wrong arrangement, but there ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    Don't Get Sued: 5 Tips To Protect Your Small Business

    Find out what you can do to limit risk and keep your business running smoothly.
  2. Home & Auto

    Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.
  3. Home & Auto

    Filling The Gaps In General Liability Insurance

    Standard liability coverage may not be enough. Special needs call for specialized policies.
  4. Brokers

    Is Your Broker Ripping You Off?

    We show you how to resolve a problem without getting the lawyers involved.
  5. Options & Futures

    Tips For Resolving Disputes With Your Financial Advisor

    Before you blame your advisor for your losses, be sure you know your rights and responsibilities.
  6. Investing

    When A Dispute With Your Broker Calls For Arbitration

    Do you have a claim you'd like to file? We'll take you through this process step by step.
  7. Insurance

    The Best Way to Insure Your Jewelry

    What you need to know to keep those baubles, bangles and beads safe.
  8. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  9. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  10. Insurance

    Do You Need Kidnap & Ransom Insurance?

    Americans working abroad – and high-profile individuals traveling frequently in kidnapping hot spots – should consider this type of protection.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!