Do Travel Agents Need E&O Insurance?

Friends, today we chat on everything errors and omissions insurance (fondly known as E&O). E&O is also referred to as "professional liability" insurance and is a good fit for any business that provides services to clients. Especially those that charge a fee for said service. Enter, YOU, the fearless travel advisor.

We'll cover where to get it, what it covers, and managing expectations on what it can (and can’t) do for travel advisors. Settle in for an enticing read!

The Disclaimer (& What We'll Cover!)

You know I’m not an attorney or insurance expert (or I hope you do, my friends and I make rainbow cookies for heaven's sake!). I’d be the worst attorney/insurance person in the world so keep that in mind when reading this.

Here's some of the big life questions Chis helped me answer about E&O:

1. What is E&O Insurance?
2. What Does E&O Insurance Cover?
3. What Doesn't E&O Insurance Cover?
4. Am I Covered by my Host Agency's E&O Policy? [+Video]
5. Do You Need an E&O Policy?
6. Who Provides Travel Agency Specific E&O Policies?
7. How Much Does Travel Agent E&O Insurance Cost?

What is E&O Insurance?

First things first. E&O insurance stands for Errors and Omissions insurance and it’s a common policy for travel advisors, travel agencies, or tour operators to carry. Why? Because it may cover the cost of errors and omissions you may make.

Buuuuut, this comes with a few caveats. Don’t let the name fool you. As it turns out, Errors and Omissions insurance doesn’t cover all errors, nor does it cover all omissions. In fact, thinking of E&O insurance as catastrophic insurance may help you as an advisor manage your expectations when it comes to coverage. It’s for those big-time-doozy occasions when something goes horribly wrong.

If you’re thinking E&O insurance is going to cover the $500 mistake of booking the client in the wrong room, or a few hundred for rebooking an airline ticket because you spelled a client's name wrong, you’re going to be sorely disappointed. On the flip side, if someone sues you for an exorbitant amount, E&O comes in really handy.

What Does E&O Insurance Cover?

E&O insurance covers booking errors and omissions that do not benefit the traveler, the traveler's family, and/or the travel advisor, and legal defense fees if your agency is named in a lawsuit.

So as you have probably already gathered, blanket statements don’t work well when it comes to Errors and Omissions insurance but if I were to make a blanket statement, it would be a) dangerous and b) something like this:

At its most basic, E&O insurance covers:

1. Booking errors and omissions that do not benefit the traveler, the traveler's family, and/or the travel advisor
2. Legal defense fees if your agency is named in a lawsuit

In my opinion, the legal defense is probably the most attractive reason for an agency to have E&O insurance. No matter how frivolous the lawsuit, your legal defense will be covered up to your policy limit until you're proven guilty. Some caveats where your legal defenses would not be covered: sexual misconduct, intentional acts, and criminal acts.

But alas, blanket statements don't really work for something so complicated as E&O insurance, especially when you consider each errors and omissions insurance provider writes their own policies. Here are a few more details below about E&O insurance add-ons and who in your agency may be covered. Onward!

E&O Insurance Add-Ons (A Hot Take)

Beyond the base policy covering the things bullet-pointed above, some E&O policies may add some other protections to their base policy.

Some things it may include (and as any good attorney adds, but is not limited to):

1. bodily injury
2. property damage
3. host liquor liability

This will vary policy by policy. For the purposes of this article, we're focusing on the Errors & Omissions facet of your coverage. The big takeaway here is to read the policies carefully, they're not cookie-cutter. If your agency works with specific groups of travelers or is in a specific niche, like adventure travel which may be considered higher risk, make sure the specific type of travel you’re booking is covered as well!

Who is covered under my E&O Insurance Policy?

Before signing the dotted line for an E&O insurance policy, know who your policy covers. Some E&O policies will cover you as an individual, some may cover your business entity, and some may cover both.

When it comes to independent contractors (ICs) and employees, that's yet another aspect to be aware of in your potential policy! Some policies may cover the entire agency, some may not. You'll want to make sure you understand if your ICs and employees need their own policies.

At the end of the day, it's important to know who (or what entity!) you want your policy to cover. Need extra protections? Some policies may include these additional protections, and some policies may only provide them if you ask for them and it may be at an additional cost to you.

What Doesn’t E&O Insurance Cover?

There are two things we want to draw attention to regarding what E&O does not cover.

1. Liability (or Slip & Fall) is not covered under E&O Insurance

Errors and Omissions insurance doesn't include Liability coverage (sometimes known as "slip and fall" insurance.) But the good news for 99.9% of readers is this liability insurance really only applies to storefront travel agencies. But if you want to get a little nerdy about other kinds of insurance, you can check out this resource on creating a crisis management plan.

2. Moral Hazard

Many agents would assume their E&O policy covers things like debit memos from the airlines or if you told a client the wrong info for travel insurance. While policies vary, those situations aren’t typically covered. In fact, you should be aware many errors common to travel agencies aren't covered. Sad face, I know.

However, let’s not forget the big picture—insurance companies are in this to make money. Abuses to the insurance system hurt profits and they want to plug those leaks. Enter the term, moral hazard. Moral hazards are not covered.

In other words, if your error/omission had no negative financial consequences beyond the cost of your deductible, and you/your client benefited from the error/omission, that’s a moral hazard. And insurance companies don’t pay for those claims.

I know moral hazard can be a little confusing so let's put it in travel advisor terms through some examples.

Sample Situation #1: 

An agency quotes a client $4,000 for a trip that really costs $5,000. (Oops!)

The verdict: Your client is happy because they saved $1,000. You’re happy because the client booked. BUT the insurance companies will call that a moral hazard, accident or not, and will not foot the bill.

Sample Situation #2: 

Your clients are going on a cruise out of Thailand. You let them know they don’t need any special visas, etc. Except, you didn't get them in a day or two ahead of time and their flight is delayed! They miss the cruise and have to catch up with it at the next port, Vietnam, which requires a visa. Whoops. They end up missing ½ their cruise while things are straightened out and are suing you for the cost of their trip.

The verdict: Your client is not happy and did not benefit. You did not benefit and could not predict the flight delay. The insurance companies would probably cover this since it doesn’t fall under moral hazard.

The Whole “Using the Host Agency’s E&O Insurance” Thing

Some host agencies allow their independent contractors to be covered under their E&O policy. Others require that the independent contractor obtain their own.

But first, how the heck do you figure out if a host agency even offers E&O insurance for independent contractors like you? Easy! Just check out the host profile.

If you want to rely on your host’s coverage, here are a few questions you can ask them:

1. What is the deductible you need to pay if a claim arises? Ideally, this deductible will be on the lower end. Why? Because if not, you’ll be on the hook for E&O claims that don’t reach the deductible.
2. What does the coverage encompass in addition to E&O?
3. How many advisors are on the policy? (and what are the total limits of liability spread across that number of advisors.)
4. Will you as an individual or, if you're an LLC or corporation, will your company be covered if named in a lawsuit?

A few tips if you are using your host’s policy: I worked at a host agency that included E&O insurance in the program costs and I was always concerned with how few agents asked for details on our policy. I mean, for all they knew, our deductible could have been $20,000 and the policy only covered where their clients were trampled by sloths!

For those just dying to know more about using your host agency's errors and omissions insurance but are sick of reading and want to exercise your ears, I have just the thing for you. I chat about using a host's E&O (and what to ask them) on one of our weekly Friday 15 episodes!

Don’t forget to ask the host agency:

Here's a few questions to ask the host agency if you decide to use their E&O insurance policy:

1. What is the deductible?
2. How many agents/agencies do the host's policy cover?
3. Could they send over a copy of the policy for you to look at? (Make sure it says it covers independent contractors.)
4. How much will the policy cover total, for all claims? (Most hosts have a policy with a $1M or $2M aggregate limit.)
5. What’s the payout limit per claim?

These questions can help you understand the risk of sharing a policy. Now, I do want to say that E&O claims are very rare—since they started hosting, most host agencies I know are still in the single digits when it comes to claims. Not having to purchase your own E&O insurance can save you a chunk of change, but it does mean the risk (even though small) is increased because it is a shared policy.

There's no right answer when it comes to you using a host agency's policy or not. It all comes down to making sure you're educated and making a decision that fits with your appetite for risk.

What if I book outside my host agency?

One last thing to mention if you decide to use your host’s errors and omissions policy. If you are booking travel outside your host’s accreditation number, either because you also have your own accreditation or because the vendor allows you to book without an accreditation number, know that any claims related to that travel will not be covered by the host's E&O policy. Only bookings made under your host’s accreditation number are covered by the host's E&O policy.

Do Travel Agents Need Errors & Omissions Insurance?

Technically, no. You’re not required to have an E&O policy by law in the United States. It’s a choice you get to make. Everyone has different levels of risk they’re comfortable with. You know your situation best—do what you need to do so you can lose sleep over something else (like getting trampled by adorable sloths).

All that said, some accreditations like IATA, may mandate E&O as a condition of their eligibility and some host agencies also require proof of E&O insurance before an IC/agency can join.

And for you Canadian readers, certain provinces have legislation requiring an agency carries E&O insurance. Although after 45 minutes of searching for that info, I've concluded that the government is insistent on avoiding specifics on which provinces those are. They just tell you that certain provinces require it. (Gosh, thanks.)

It’s worth mentioning that while it may not be required by law everywhere, E&O insurance may be required in other situations: For instance, members of the Association of Canadian Travel Agents (ACTA) that have retail locations and live in those mysterious non-regulated provinces are required to have E&O insurance.

Which E&O Policies are (Specifically) for Travel Agencies?

You can get your E&O policy from most insurance providers. You could call up whatever company you have your homeowners or car insurance with and ask them to add an E&O insurance to your fun grouping of insurances.

There are advantages to having all your policies with one insurance agent (if you were to get your insurance policy through the agency that does your car/homeowners/renters insurance), and there are advantages to working with someone that understands the nuances of the travel industry.

Here are a few of the popular carriers that have travel agent-specific E&O policies (let me know if I missed any!):

360 Coverage Pros

(HAR's recommended provider due to the company being active in the travel industry and understanding the nuances.)

1. ACTA Protect by Brokerlink (Canada)
2. Aon Group
3. Berkshire Hathaway

How Much Does Travel Agent E&O Insurance Cost?

The cost of an Errors & Omissions policy is often based on the total agency sales, so you’ll have to ask around to get specific prices. Also, make sure to ask your consortia, travel agent associations, and/or host agencies about any preferred supplier agreements with E&O companies—that could save you some moola!

Just Can’t Get Enough?

I know. Who doesn’t love a good legal/insurance article? Legal jargon and complications are the perfect way to wind down and relax before bed.

For more delightful reads, check out these articles:

Protect Your Agency: Travel Waivers

How To Protect Your Agency During Turbulent Times

Travel Industry Lawyers

The Final Takeaway

E&O insurance can be confusing and travel advisors and agencies should understand it's not a silver bullet for fixing mistakes. But an E&O policy will definitely decrease your financial burden if you or your agency is named in a lawsuit. So if having a client sue you keeps you up at night, E&O will help you get some shuteye.

Like any business decision, it's about knowing and weighing out the risk and ultimately doing what you're comfortable with. Would love to hear the route your agency takes in the comments section!

Last, but not least, thank you to Chris Buseman, Vice President or Travel 360 who offered his professional vantage point in our latest update of this article!

Editor's Note: This was originally published in 2013 and updated and republished at date listed above.