What does Errors and Omissions insurance protect agents from?

Errors and Omissions (E&O) insurance is specifically designed to protect professionals, such as insurance agents and brokers, from claims arising due to mistakes or negligence in the services they provide. This type of insurance covers legal defense costs and any settlements or judgments that may arise from claims made against the agent for providing incorrect advice or failing to fulfill their professional duties.

In this context, the protection against claims from clients for incorrect advice directly relates to the core purpose of E&O insurance. It ensures that agents have financial support should a client allege that they received improper advice that negatively impacted their situation, whether that be in terms of financial loss, property damage, or denial of coverage.

The other choices, while related to various risks in the insurance field, do not accurately capture the primary focus of E&O insurance. Losses due to client defaults pertain more to financial risks rather than professional liability. Legal fees from nonadmitted insurers are specific to certain legal situations that do not fall under general errors and omissions coverage. Penalties for filing improper claims address compliance and regulatory issues, which are separate from the protective scope of E&O insurance.