Let's set the stage
Errors and omissions insurance (E&O) covers claims that you made a professional mistake: a missed enrollment, wrong advice on a plan, a policy that lapsed because a form was not sent. In Medicare, the stakes are real. A client who loses a doctor or a drug because of an enrollment error can lose money, and they may blame the agent. E&O is how an agency pays for a defense and a settlement without paying out of pocket.
Is E&O legally required?
It depends on the state, the type of entity and the line. Here is what we verified for the states on our agency license pages:
| Rule | What it requires | Source |
|---|---|---|
| California LLC licensees (Cal. Ins. Code 1647.5) | E&O or other security of at least $500,000 plus $100,000 for each licensee providing professional services, capped at $5,000,000. Proof on form LIC CC1 at application and an annual certification by March 31. | California Department of Insurance |
| Texas agencies (Ins. Code 4001.106) | A $250,000 E&O policy with a deductible of no more than 10 percent, or a $25,000 surety bond payable to TDI. NIPR says nonresidents with a current resident license on the Producer Database are exempt. | Texas Department of Insurance |
| Arizona producer business entities | No bond, E&O or net worth requirement stated for a producer entity on the state's licensing pages. | Arizona DIFI and NIPR |
| Medicare (42 CFR 422.2274) | Agents must be licensed and appointed under state law and trained and tested every year. The rule does not list E&O as an agent requirement. | Federal regulation |
See each state page for that state's verified requirements, since rules change and they differ more than most agency owners expect.
Here's the thing: carriers and uplines ask anyway
Even where the state does not require it, many carriers ask for an E&O declarations page in the contracting packet, and many FMOs require it to contract you. A missing or expired certificate is one of the most common reasons a contract sits in a queue. Keep a current PDF of your declarations page with your NPN and license copies.
Agency policy vs agent policy
- Agency policy. Covers the business entity and usually the agents named on it. Good for agencies with employed or captive agents.
- Individual agent policies. Each agent carries their own. Common when agents are independent contractors under your agency.
- Both. Many agencies carry an agency policy and require each contracted agent to carry their own, so a claim against one agent does not hit the agency's limits alone.
What to look at when you buy
- Limits per claim and aggregate. Check whether any state license or carrier contract you hold names a minimum.
- Lines covered: Medicare Advantage, Medigap, Part D, life, final expense and ACA if you sell them.
- Whether defense costs reduce your limits.
- Prior acts coverage if you are switching carriers.
- Who is covered: the entity, the owner, employees, contracted agents.
Let's be real
The cost of E&O is small next to the cost of one serious claim. If you are building an agency and adding agents, decide your E&O rule for agents before you hire the first one, and write it into your agent agreement. Then contract your agency with ESI at agency contracting.
Frequently asked questions
Is E&O insurance required for an insurance agency license?
In most states it is not a condition of a life and health agency license, but some states require it for certain entities. California requires licensed LLCs to carry E&O or other security of at least $500,000 plus $100,000 per licensee, up to $5,000,000.
Do Medicare agents need E&O insurance?
Federal Medicare rules require licensing, appointment and annual training, not E&O. But many carriers and FMOs ask for proof of E&O before contracting, so most Medicare agents carry it.
Does my agency's E&O cover my agents?
Only if the policy names or includes them. Many agencies carry an agency policy and also require contracted agents to carry their own. Read the insured definition in your policy.
What does E&O insurance cover for an insurance agent?
It covers claims that you made a professional error or omission, such as a missed enrollment or incorrect advice, including defense costs up to the policy's limits. Coverage details vary by policy.
Sources
Updated October 13, 2026 by the Everything Senior Insurance Data Desk.