I. Why This Guide Matters
As a consultant, your job is to help clients make smart decisions. People count on your advice to grow their business, solve problems, and avoid mistakes. But even if you do everything right, things can still go wrong.
A client might say your advice caused them to lose money. They could even sue you. Defending yourself takes time and money—even if you did nothing wrong.
Errors and Omissions (E&O) insurance helps protect your business. It covers legal costs if someone claims you made a mistake or failed to do your job properly.
This guide explains what E&O insurance is, why consultants need it, what it covers, and how to get the right policy for your business.
Key Takeaways
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E&O Insurance Protects Consultants from Legal Claims
Errors and Omissions (E&O) insurance helps cover legal costs if a client claims your advice or services caused them financial harm—even if the claim is false.
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Any Consultant Who Gives Advice Should Consider Coverage
If your work involves advising, planning, or delivering specialized services, E&O insurance is highly recommended. This includes IT, marketing, financial, HR, and business consultants.
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E&O Covers Common Risks Like Mistakes, Missed Deadlines, or Bad Advice
Typical claims involve errors in work, contract disputes, or failure to meet client expectations. Coverage includes attorney fees, court costs, and settlements or judgments.
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It Doesn’t Cover Everything
E&O insurance does not cover criminal acts, bodily injury, property damage, employee issues, or cyberattacks. Other types of insurance are needed for those risks.
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Most Consultants Choose $1M–$2M in Coverage
The amount you need depends on the size of your contracts and the risks involved. Some firms may need more than $5M in coverage.
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Policy Costs Are Affordable Compared to Legal Fees
Solo consultants can expect to pay $500–$2,500 annually. Small firms may pay $2,000–$8,000+. The cost varies based on your business, claims history, and coverage limits.
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Not All Policies Are the Same—Choose Carefully
Look for a claims-made policy with a retroactive date, defense coverage outside policy limits, and a reliable insurer. Work with an advisor who understands your business.
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Good Practices Can Help Prevent Claims
Use clear contracts, define your scope of work, avoid overpromising, and keep detailed records. These habits help reduce misunderstandings and protect you if a claim arises.
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Kelstar Insurance Specializes in Consultant Coverage
Kelstar works with over 50 top-rated insurers and offers tailored advice to help consultants get the right protection at the right price.
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Having E&O Insurance Provides Peace of Mind
With E&O coverage, you can focus on doing your best work—without worrying that a single mistake or complaint could damage your business.
II. What Is E&O Insurance?
E&O insurance—short for Errors and Omissions—is a special kind of business insurance. It helps when someone says your work caused harm.
If a client believes you made a mistake, gave bad advice, or didn’t deliver what you promised, E&O insurance can help cover the cost of dealing with that claim.
Simple Example:
You’re a marketing consultant hired to create an ad campaign. The campaign doesn’t bring in new customers. The client says you gave them bad advice and sues you. Even if it’s not your fault, you still need a lawyer.
E&O insurance helps pay for:
It protects your time, money, and reputation—even if the claim turns out to be false.
III. Why Consultants Need E&O Insurance
Consultants give expert advice. But no advice is perfect. Even if you’re careful, a client could still blame you if something goes wrong.
Common Situations:
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You miss a project deadline.
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Your advice leads to unexpected problems.
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A client misunderstands what you promised.
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You forget an important detail in your report.
In each case, a client might take legal action—even if it’s unfair.
IV. Who Should Get E&O Insurance?
If you give advice or services that help other people make decisions, E&O insurance is a smart choice.
It’s especially important for:
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IT or software consultants
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Marketing and PR consultants
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Financial and accounting consultants
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Business or management consultants
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HR and staffing consultants
If your work affects how others manage money, people, or operations, having protection is important.
V. What Does E&O Insurance Cover?
E&O insurance helps pay for the costs of claims that your work caused harm—even if it didn’t. It covers situations where a client says you:
What’s Covered:
Most E&O policies are claims-made. That means the policy must be active both when the work was done and when the claim is made.
VI. What E&O Insurance Doesn’t Cover
Even though E&O insurance covers many things, it doesn’t cover everything.
Not Covered:
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Intentional wrongdoing or fraud
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Injuries or property damage (general liability covers that)
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Employee problems like harassment or discrimination (use EPLI)
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Cybersecurity problems or hacks (use cyber insurance)
📌 Example: If an HR consultant’s client is sued by a former employee, that’s not covered by E&O. A different insurance policy is needed for that.
VII. How Much E&O Coverage Do You Need?
The amount of coverage you need depends on your work, your clients, and the size of your projects.
Things to Consider:
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How big are your contracts?
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What could go wrong?
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Do clients require you to carry insurance?
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What’s your biggest possible risk?
Common Coverage Amounts:
📊 Example: A solo consultant working with small businesses might need $1M. A team working with hospitals or banks might need $5M or more.
VIII. How Much Does E&O Insurance Cost?
The cost of E&O insurance is usually affordable—especially compared to the price of a lawsuit.
Average Costs:
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Solo consultants: $500 to $2,500 per year
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Small firms: $2,000 to $8,000+ per year
What Affects the Price:
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The type of work you do
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How long you’ve been in business
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If you’ve had claims before
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How many clients or employees you have
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How much coverage you choose
💡 You may be able to save money by:
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Choosing a higher deductible
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Bundling E&O with other business insurance
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Keeping clear contracts and strong communication
IX. Real Examples of E&O Claims
Even careful consultants can face lawsuits. Here are some real-life examples where E&O insurance would help:
1. IT Consultant:
You help a company move its data to a new system. Some files are lost during the transfer. The client sues you for the cost of the missing data.
2. Business Consultant:
You suggest a new pricing plan. Sales drop afterward, and the client says your advice caused the problem.
3. Marketing Consultant:
You run an ad campaign with a phrase another company owns. Your client gets sued and then blames you.
In each case, E&O insurance helps cover legal costs—even if the claim turns out to be false.
X. How to Choose the Right E&O Policy
Not all E&O policies are the same. It’s important to know what you’re buying and how it works.
What to Look For:
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Claims-made coverage
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A retroactive date that covers earlier work
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Legal defense coverage outside your policy limits
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A clear list of exclusions (things not covered)
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A highly rated carrier you can trust
Work with an insurance advisor who understands your field. The team at Kelstar Insurance helps consultants across industries find the right protection.
XI. How to Avoid E&O Claims
While insurance helps, it’s best to avoid claims in the first place. Here’s how you can reduce risk:
Smart Practices:
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Always use written contracts
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Be clear about what services you’ll provide
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Don’t overpromise results
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Keep all communication in writing
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Get client approvals at key stages
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Review your work before delivery
Adding simple legal protections, like limits on liability or required mediation, can also help if something goes wrong.
XII. Why Choose Kelstar Insurance?
At Kelstar Insurance, we understand that every consultant is different. That’s why we don’t offer one-size-fits-all solutions. We help you build a policy that fits your business, your industry, and your goals.
What You Get:
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Access to 50+ top-rated insurance companies
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A team that works across Wyoming, Illinois, and Colorado
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Experience helping consultants protect their work
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Clear answers to your questions—no pressure or confusion
We’ll help you compare options and choose coverage that works for you now and in the future.
XIII. Conclusion
Being a consultant means helping others make important decisions. But when things don’t go as planned, you might be blamed—even if you did nothing wrong.
Errors and Omissions insurance helps protect you from the cost of legal claims. It pays for lawyers, court costs, and settlements when a client says your work caused them harm.
Whether you’re just starting your consulting career or growing a small team, having E&O insurance gives you peace of mind. It lets you focus on what you do best—helping clients—while staying protected from unexpected legal trouble.
📞 Want to get started?
Visit https://www.kelstarinsurance.com/contact
or call 307-316-8240 to talk to a Kelstar advisor. We’ll help you choose the right coverage for your consulting work and your budget.
Frequently Asked Questions (FAQs)
1. What is Errors and Omissions (E&O) insurance?
E&O insurance is a type of business insurance that protects consultants if a client says their advice or service caused a financial loss. It helps cover legal costs like lawyer fees, court expenses, and any money you may have to pay if you lose or settle a claim.
2. Who needs E&O insurance?
Any consultant who gives advice or professional services should consider E&O insurance. This includes IT consultants, marketing experts, HR advisors, business consultants, financial planners, and more.
3. Does E&O insurance cover mistakes I didn’t actually make?
Yes. E&O insurance helps even if the client’s claim is false. The policy will still pay for your legal defense, which can be very expensive—even if you win the case.
4. What kinds of problems does E&O insurance cover?
E&O insurance typically covers:
5. What is not covered by E&O insurance?
E&O insurance does not cover:
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Illegal or dishonest actions
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Injuries or property damage (use general liability insurance for that)
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Employee-related issues like harassment (use EPLI)
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Cyberattacks or data breaches (use cyber liability insurance)
6. How much E&O coverage do I need?
Most consultants choose $1 million per claim and $2 million total per year. If you work on large projects or with big companies, you may need more. Your clients may also require a specific amount in your contract.
7. How much does E&O insurance cost?
Prices vary. On average:
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Solo consultants pay $500–$2,500 per year
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Small firms pay $2,000–$8,000+ per year
Cost depends on your work, experience, claims history, and how much coverage you want.
8. What is a “claims-made” policy?
A claims-made policy means your insurance must be active when the claim is made and when the work happened. If your policy isn’t active, you won’t be covered—even for past work.
9. Can I reduce my chances of getting sued?
Yes. You can lower your risk by:
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Using clear, written contracts
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Sticking to the scope of work
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Avoiding promises you can’t guarantee
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Keeping good records
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Getting client approval at key stages
10. Why should I get E&O insurance through Kelstar Insurance?
Kelstar Insurance works with over 50 top-rated insurance companies. We help consultants find affordable, personalized E&O coverage based on the work they do. Our team makes it easy to understand your options and stay protected.
11. How do I get started with E&O insurance?
It’s simple.
👉 Visit https://www.kelstarinsurance.com/contact
📞 Or call 307-316-8240 to speak with a Kelstar Insurance advisor.
We’ll help you find the right policy and answer all your questions—no pressure.
This article has been a collaboration between Kelstar Insurance and OpenAI’s ChatGPT. Created on May 29, 2025, it combines AI-generated draft material with Kelstar Insurance's expert revision and oversight, ensuring accuracy and relevance while addressing any AI limitations.