Personal Lines Insurance Practice Exam 2025 - Free Practice Questions and Study Guide

An errors and omissions policy, often referred to as E&O insurance, is specifically designed to protect professionals against claims of negligence, errors, or omissions in the performance of their professional services. This type of insurance is crucial for individuals who provide specialized services, such as consultants, real estate agents, and legal professionals, as it covers the costs associated with defending against legal claims and any settlements or judgments that may arise from alleged professional negligence.

When clients believe they have received inadequate service that resulted in financial loss, they may file claims against the professional. The errors and omissions policy mitigates these potential issues by covering defense costs, court fees, and damages awarded to the claimant, thus protecting the professionals’ financial well-being from the consequences of mistakes made during the course of their work.

While natural disasters, property damage liabilities, and general business liabilities are important aspects of risk management within businesses, they fall under different types of insurance coverage. Natural disasters typically require property insurance or business interruption insurance, while property damage and general business liabilities would be covered under general liability insurance.