Here's something that confuses almost everyone looking for professional liability coverage: Is there actually a difference between E&O insurance and malpractice insurance, or are insurance companies just using different names for the same thing? The short answer is that they're essentially the same type of coverage—professional liability insurance that protects you when a client sues you for making a mistake. The longer answer involves understanding why certain professions use one term over the other, and what that means for your coverage needs.
If you're a doctor, therapist, or lawyer, you'll almost always see your coverage called malpractice insurance. If you're a consultant, IT professional, real estate agent, or accountant, it'll probably be called E&O (errors and omissions) insurance. But both policies do the same fundamental job: they cover your legal defense costs, settlements, and judgments when someone claims your professional services caused them harm.
What E&O Insurance Actually Covers
Errors and omissions insurance protects you when your professional advice or services cause someone to lose money. The classic example: You're a financial advisor who recommends an investment that ends up tanking, and your client sues you for the financial loss. Or you're a marketing consultant who misses a critical deadline, causing your client to lose a major contract opportunity. These are errors (you did something wrong) or omissions (you failed to do something you should have done) that resulted in financial harm.
E&O insurance covers your legal defense costs even if the lawsuit is frivolous, which is huge. Attorney fees can easily run $10,000 or more before you even get to a settlement or trial. Your policy also covers any settlement you agree to or judgment against you if you lose in court. Most small businesses choose $1 million per occurrence with $1 million annual aggregate coverage, which means up to $1 million per claim and $1 million total per year.
The key thing to understand about E&O coverage is that it specifically excludes bodily injury claims. If your professional mistake causes someone physical harm, that's not covered under a standard E&O policy—that's where malpractice insurance comes in.
When It's Called Malpractice Instead
Malpractice insurance is professional liability coverage for professions where mistakes can cause bodily harm or serious legal consequences. This is almost exclusively healthcare providers (doctors, nurses, dentists, therapists, chiropractors) and lawyers. If you're a surgeon and you make a mistake during an operation that injures your patient, that's malpractice. If you're a lawyer and you miss a filing deadline that costs your client their case, that's also malpractice.
Malpractice policies cover the same things as E&O policies—legal defense, settlements, judgments—but they're designed specifically for the unique risks these licensed professionals face. A medical malpractice policy might also cover things like regulatory investigations, licensing board hearings, and HIPAA violations. These are risks that don't typically apply to, say, an IT consultant or a real estate agent.
Because the potential for serious bodily harm is higher, malpractice insurance typically costs more than E&O insurance. A surgeon's malpractice policy can run tens of thousands of dollars annually, while an IT consultant might pay $500 to $1,000 per year for E&O coverage. The risk is just fundamentally different.
Who Actually Needs Which Type
The terminology really just follows industry convention. If you're in technology, real estate, insurance, accounting, consulting, or financial services, you'll be looking for E&O insurance. If you're in healthcare or legal services, you'll be looking for malpractice insurance. But functionally, they're both professional liability coverage protecting you from claims of professional negligence.
As of 2024, only seven states actually require physicians to carry malpractice insurance: Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin. Coverage requirements range from $100,000 to $1 million per occurrence. However, most hospitals and medical groups require it regardless of state law, and practically speaking, you can't operate as a healthcare provider without it.
For E&O insurance, requirements vary more. Real estate agents in some states are required to carry it. Insurance producers in Rhode Island need at least $250,000 per occurrence and $500,000 aggregate. But even if your state doesn't require it, many clients will demand proof of coverage before they'll work with you. It's becoming table stakes for most professional services.
What You'll Actually Pay
For standard E&O insurance, most small businesses pay between $42 and $78 per month, according to 2024 data from major insurers. That works out to roughly $500 to $950 annually for typical coverage limits of $1 million per occurrence and $1 million aggregate. High-risk industries like financial services, IT consulting, or architectural services might pay $2,000 to $2,500 annually or more.
Malpractice insurance costs vary wildly by specialty and location. A family practice physician might pay $3,000 to $10,000 annually, while an OB-GYN or surgeon in a high-litigation state could pay $50,000 or more. Lawyers typically pay $1,500 to $5,000 annually depending on their practice area—litigation attorneys pay more than real estate lawyers, for example.
What drives your cost? Five main factors: your profession and industry, the size of your business and revenue, your coverage limits and deductible, your claims history, and your location. A clean claims history can save you significantly, while even one lawsuit can increase your premiums for years.
How to Get the Right Coverage
Don't get hung up on whether you need E&O or malpractice insurance—focus on getting professional liability coverage appropriate for your profession. When you talk to an insurance agent or broker and tell them what you do, they'll know exactly what type of policy you need and what it's called in your industry.
Start by checking if your state or professional licensing board requires specific coverage. Then look at what your clients or contracts require—many contracts specify minimum coverage limits. Finally, consider your actual risk: How large are your typical projects? What would a realistic lawsuit look like? That'll help you determine appropriate coverage limits.
Most professionals are well-served by $1 million per occurrence and $1 million aggregate coverage, but larger businesses or those in high-risk fields may need $2 million or more. Get quotes from multiple insurers—prices can vary significantly for the same coverage. And remember, the cheapest policy isn't always the best one. Look at what's actually covered, what the exclusions are, and whether it's claims-made or occurrence-based coverage.
Whether you end up with a policy called E&O insurance or malpractice insurance, you're getting the same essential protection: coverage that protects your business and personal assets when a client claims your professional services caused them harm. The name matters less than making sure you have adequate coverage for your specific profession and risk profile.
