What is the purpose of errors and omissions insurance?

The purpose of errors and omissions insurance, commonly referred to as E&O insurance, is specifically designed to cover professionals against claims arising from negligent acts, errors, or omissions that occur in the course of providing their professional services. This coverage includes legal defense costs and any settlements or judgments that may result from such claims.

Professionals like consultants, realtors, and medical practitioners benefit from this insurance as it helps protect their financial interests in situations where a client alleges that they have received inadequate or faulty services. The focus of E&O insurance is on negligence—if a professional makes a mistake or fails to perform their duties to the expected standard, this insurance can provide crucial financial support.

Understanding this purpose clarifies why the other options are not applicable. Unlike property insurance, E&O is not meant to cover intentional misconduct, property damage, or regulatory fines. Thus, option B accurately encapsulates the primary function of errors and omissions insurance in a professional context.