A consultant in Hamilton cancelled her policy the week she wound down her practice. Fourteen months later, a former client sued over a filing she had prepared while fully insured. Nobody paid her defence costs because the coverage she had bought only responds while it is in force.
Errors and omissions insurance pays the defence costs and damages when a client says your professional advice or work caused them financial loss. In Canada, it is almost always written on a claims-made basis. The policy that responds is the one in force the day the claim is reported, not the day you made the mistake.
TL;DR
- Claims-made means your current policy pays, so cancelling it strands every file you ever worked on.
- The retroactive date decides how far back your cover reaches. Protect it when you switch insurers.
- Tail coverage, also called an extended reporting period, commonly costs 100% to 200% of your last annual premium.
- RECO, FSRA, RIBO, the Law Society and CPA Ontario each set a minimum limit, so the number is often not yours to choose.
- Typical Canadian premiums at a CA$1 million limit run from about CA$400 to CA$3,500 a year, and higher for engineering and design.
What this policy covers, and what it will not touch
The trigger is a professional service that went wrong. Bad advice, a missed limitation period, a botched valuation, a survey with the wrong boundary, a tax return that cost the client a penalty: all of it lands here. Your insurer takes over the defence, hires counsel, and pays damages or a settlement up to the limit.
Exclusions matter just as much. Deliberate fraud and dishonesty are out, although many policies defend you until a court actually finds you dishonest. So are guarantees of a specific outcome, disputes over your own fees, and claims you already knew about when you signed the application. That last one is the quiet killer, because a client complaint you never reported becomes a known circumstance the new insurer can decline.
Bodily injury and property damage sit elsewhere. A commercial general liability policy handles the visitor who slips in your reception area, and it expressly excludes loss caused by professional advice. That exclusion is the entire reason this second policy exists.
Money is what is at stake, and the amounts are ordinary. A client who says your work cost them CA$28,000 does not need a Superior Court trial. Most of these files start in Ontario’s Small Claims Court rather than anywhere grander.
Who is required to carry errors and omissions insurance in Canada
Coverage is voluntary for a freelance copywriter and compulsory for a mortgage agent. Licensing bodies, not insurers, set the floor, and they publish it.
According to Ontario Regulation 347/04 under the Insurance Act, a licensed life agent must hold at least CA$1 million of coverage for one occurrence. That requirement still stands in 2026, and the policy must also extend to loss from fraudulent acts. If it lapses, the regulator can post a public note on your profile, impose a penalty, or pull the licence.
| Profession | Who requires it | Minimum limit set by the regulator | What it costs |
|---|---|---|---|
| Real estate salespersons and brokers, Ontario | RECO, as a condition of registration | CA$2 million per claim, CA$4 million a year, plus commission protection and deposit cover | CA$500 for the 2026 to 2027 policy period, taxes included |
| Mortgage brokers, agents and administrators | FSRA, under O. Reg. 188/08 and 189/08 | CA$500,000 per occurrence, CA$1 million a year, with a fraud extension | Usually carried and paid by the brokerage |
| Life and accident and sickness agents | FSRA, under O. Reg. 347/04 | CA$1 million per occurrence, with a fraud extension | Often bundled through an agency or association plan |
| General insurance brokerages, Ontario | RIBO | CA$3 million per claim, CA$6 million aggregate, plus a fidelity bond of at least CA$100,000 | Scales with the brokerage’s size and revenue |
| Lawyers in private practice, Ontario | LawPRO, mandatory through the Law Society | CA$1 million per claim, CA$2 million a year | A base premium in the low CA$3,000s per lawyer in recent years, plus transaction levies |
| Licensed paralegals, Ontario | Law Society of Ontario, By-law 6 | Own policy required, bought on the open market | Varies with practice area and the limit chosen |
| CPA firms, Ontario | CPA Ontario | CA$1 million for a one-member firm, CA$1.5 million at two or three, CA$2 million at four or more | Roughly CA$800 to CA$2,500 a year for a small practice |
Outside those lists, buyers are still pushed into coverage by contract. Government procurement, franchise agreements and enterprise vendor forms routinely demand a CA$2 million certificate before anyone signs.
Claims-made, not occurrence: the rule that decides whether you get paid
An occurrence policy, the kind that covers your building and your delivery van, answers a simple question: was a policy in force on the day the damage happened? Find that year’s policy, and it responds, even decades later.
Professional liability works backwards. Your claims-made wording asks a different question: is a policy in force on the day the claim is first made against you and reported to the insurer? The work can be nine years old. What matters is today’s certificate.
Insurers write it this way because professional mistakes surface slowly. An estate plan can sit undisturbed until someone dies, and a structural opinion until the building settles. No underwriter wants to price a 2026 policy against claims that might arrive in 2043.
The retroactive date is the real start of your coverage
Every claims-made policy carries a retroactive date. Work you did before it is not covered, full stop, no matter how long you have been paying premiums. Some policies are issued with “full prior acts”, which drops the date and reaches back over your whole career.
Here is where professionals lose years of protection. You switch brokers to save CA$200, and the new insurer sets the retroactive date at the new policy’s inception. Your first six years of files just became uninsured, and no premium you pay in the future will bring them back. When you move, the instruction is one line: match my existing retroactive date or give me full prior acts.
A single gap can orphan years of work
Continuous coverage is not a nice habit. It is the mechanism. Take three months off between policies because work is slow. The new insurer will normally set the retroactive date at the new start date and exclude everything before it.
Renew on time. If cash flow is the problem, ask about instalments or a higher deductible rather than a break in cover. Lapsed cover costs far more than a payment plan.
Tail coverage: what you buy when you retire or switch insurers
Stop paying, and the protection stops with the last day of the term. That is the trap in the Hamilton example above. It applies whether you retire, sell the practice, take a salaried job, or move to an insurer that will not honour your old retroactive date.
An extended reporting period, known in the market as tail coverage, fixes it. It does not cover new work. It keeps the door open for claims arising from work you already did, and you buy it once, from the insurer you are leaving.
Budget for it seriously. Expect 100% to 200% of your expiring annual premium, depending on whether you want one year, three years or an unlimited run-off. A CA$1,800 policy can therefore hand you a CA$2,700 bill in the year you stop earning from it.
Some regulators simply order it. CPA Ontario requires unreduced professional liability coverage to be maintained for at least six years after a member stops practising public accounting, and that obligation survives into the member’s estate. Retirement does not end the exposure, so it cannot end the policy.
Defence costs inside the limit or on top of it
Two policies can both say CA$1 million and pay out very differently. The difference sits in one clause about the cost of defending you.
Say a client sues for CA$900,000 and your insurer spends CA$250,000 on counsel and expert reports over two years. If defence costs erode the limit, CA$750,000 remains to settle with, and the shortfall is yours. If they sit in addition to the limit, the whole CA$1 million is still available, and the legal bill is the insurer’s problem.
Ask which one you are buying before price decides it for you. Costs-inclusive wordings are cheaper for a reason, and on a long negligence file the defence spend is rarely small. RECO’s program shows the friendlier design: its E&O deductible of CA$2,500 applies to damages only, so a registrant defended successfully pays nothing toward the lawyers. Deductibles behave differently across the market, and several of the guides in our Canadian law and business library deal with the contract terms that sit alongside them.
What it costs in Canada in 2026
Premiums move with your revenue, your claims history, the limit you pick, and how much money a single mistake could put at risk. Treat these as ranges for a CA$1 million per claim and CA$2 million aggregate policy, not quotes.
| Profession | Typical annual premium range |
|---|---|
| Management or business consultant | CA$400 to CA$1,200 |
| Marketing agency, designer or copywriter | CA$400 to CA$1,500 |
| IT consultant or software developer | CA$600 to CA$2,000 |
| Bookkeeper or tax preparer | CA$500 to CA$1,500 |
| CPA in small practice | CA$800 to CA$2,500 |
| Insurance broker or financial advisor | CA$1,000 to CA$3,500 |
| Engineer or architect | CA$1,000 to CA$5,000 and up |
| Real estate salesperson, Ontario | CA$500 through RECO’s program |
Two things shift these numbers fast. One prior claim can add half again to the renewal. Moving from a CA$1 million limit to CA$2 million usually adds 30% to 60% rather than doubling the price.
Five questions to ask before you sign
- What is the retroactive date, and does it match the day I started practising?
- Are defence costs inside the limit or payable in addition to it?
- Is this claims-made, or claims made and reported, and how many days do I have to notify you?
- What would an extended reporting period cost me, how long can I buy, and is the option guaranteed?
- Does the limit meet my regulator’s minimum, including any required fraud extension?
Get the answers in writing from the broker, not from a summary page. The binder and the declarations are the contract.
Where to go from here
Pull your declarations page today and find three fields: the retroactive date, the limit, and whether defence costs erode it. If the retroactive date is younger than your practice, that is the call to make this week. Questions about the legal side of a professional dispute can go through the Lawverra contact page. Questions about limits and tail pricing belong with a broker who writes your profession every day.
Frequently asked questions
Yes. Canadian insurers use the two names for the same product, and doctors and lawyers often call their version malpractice cover. Read the wording rather than the label.
You do. A commercial general liability policy covers injury and property damage and excludes claims arising from your professional advice, which is exactly what a dissatisfied client sues over.
It ends with the policy term unless you buy a tail. Clients can sue years after the file closes, and CPA Ontario makes a six-year run-off mandatory for members leaving public accounting.
Only if the retroactive date reaches back that far or the policy grants full prior acts. Ask for it at the quote stage, because adding it later usually means underwriting and a higher price.
Immediately, and report circumstances that might become a claim as well. Canadian courts enforce notice conditions strictly, and a late report under claims-made and reported wording can end coverage entirely.
Premiums for cover you carry to earn business income are generally a deductible business expense. Your accountant can confirm the treatment for your structure.
