How Much E&O Coverage Should Professionals Carry?

Errors and Omissions (E&O) Insurance is essential if you offer advice, services, or professional judgment — but how much coverage is enough?

There is no single correct number. The right amount depends on what you do, who you work with, how much you charge, and how serious the financial consequences could be if something went wrong. While many professionals start with $1 million in coverage, some contracts require more, and some risk profiles demand it.

Choosing the right limit means asking: If something went wrong, how big could the claim be?

Understanding E&O Coverage Limits

An E&O policy usually includes two limits:

Per claim limit: The maximum amount the insurer will pay for a single incident or lawsuit.
Aggregate limit: The maximum amount the insurer will pay in total during your policy period, usually one year.

For example, a $1 million per claim and $2 million aggregate policy would cover up to $1 million for each qualifying claim, and no more than $2 million total for all claims in that year.

Note: Legal defense costs are typically included in those limits. This means a claim that involves a lengthy trial or expensive legal team could reduce the amount available for a final settlement.

How to Estimate the Right Amount

Start with a baseline, then adjust based on the size of your contracts, the sensitivity of your work, and who your clients are.

You may want higher coverage if:

You work with high-value contracts or clients with large financial stakes
Your advice or service directly affects your client’s revenue, operations, or reputation
You work in a regulated profession or high-risk industry
You are entering into contracts that require a specific insurance minimum

Factor	Recommended Coverage	Why It Matters
Small freelance contracts	$1 million per claim	Covers most disputes for independent professionals
Consulting with medium-sized firms	$2 million per claim	Reflects higher exposure and client expectations
Government or large private clients	$2 to $5 million per claim	Often required in contracts
High-risk fields (finance, IT, legal)	$5 million or more	Financial harm potential is significant

Caution: Carrying less coverage than required in a contract can void your eligibility or leave you personally liable for any uncovered losses.

When Clients Specify E&O Limits

Many client contracts especially in industries like finance, construction, legal, or consulting — include clauses that state how much E&O insurance you must carry. This is not a suggestion. If your policy does not meet the minimum, you may be disqualified or exposed to penalties.

Tip: Always review your contract’s insurance clause. If a client requires $2 million in coverage and your policy only covers $1 million, you need to increase your limit before signing.

Balancing Premiums and Protection

Higher coverage means higher premiums, but the difference is often modest compared to the value of the protection. Ask yourself:

How likely is a claim in my line of work?
How much could a single error cost me or my client?
Can I afford to cover legal defense and damages on my own?

E&O premiums are often a small percentage of what you earn from one client. When you consider the cost of defending a single lawsuit, even a few extra dollars in premium can provide major peace of mind.

The Right E&O Limit Grows With Your Business

As your client list grows and your contracts increase in value, your exposure also grows. What started as adequate coverage may no longer be enough a year or two later. Review your limits annually and adjust them if your risk profile or contract requirements change.

E&O insurance is not just a line item — it is your legal and financial safety net. With the right limit, you can operate with more confidence and show your clients you are serious about standing behind your work.