What Is the Cost of Errors and Omissions Insurance?

A number of factors influence the cost of E&O insurance! Your company, like many others, may offer consulting, design, financial, or other professional services to customers or clients. However, no one is perfect, and your company may make errors that result in a client losing money. They may then file a claim against your company to seek restitution. By purchasing errors and omissions (E&O) insurance, you can protect your company from claims arising from professional mistakes. E&O insurance is a kind of specialized liability insurance. If you don't have it yet, your business could be in serious financial trouble. This kind of insurance is widely available and may be more affordable than you think. Learn how it can help you protect your company's investment.

Important Takeaways

Errors and omissions (E&O) insurance defends your company against third-party claims of negligence, errors, or omissions made while providing professional services.
Some E&O policies are industry-specific, while others cover risks that businesses in a wide range of industries face.
The price of an E&O policy varies, but most small businesses pay between $500 and $1,000 per year.
You can lower the cost of E&O insurance by raising your deductibles and shopping around for discounts.

Errors and Omissions (E&O) Insurance: What Is It?

Errors and omissions (E&O) insurance protect a company from claims arising from its negligence, errors, omissions, or mistakes while providing advice or services. E&O insurance, also known as professional liability insurance, covers damages or settlements paid to claimants as well as the cost of defending your company in court. Defense costs may be covered by E&O policies either within the policy limit or (preferably) in excess of the limit.

How Does Errors & Omissions Insurance Work?

If a company gives advice or provides a professional service that requires specialized knowledge or training, it needs E&O insurance. E&O coverage may be required by state law for some professionals. Here are some examples:

Accountants
Architects
Engineers
Consultants in business
Firms in the technology sector
Inspectors of houses
Agents of real estate

E&O policies are classified as claims-made or occurrence, with the former being the most common. Both types of E&O policies cover claims brought against a company as a result of events that occurred during the policy period. Claim-made E&O policies, on the other hand, must be filed before the policy's expiration date. Policies for occurrences can be filed at any time during the policy period. Note that claims-made policies are typically less expensive than occurrence policies because they do not cover claims filed after the policies have expired.

E&O Insurance Types

E&O policies come in a variety of shapes and sizes, with some tailored to specific industries. For example, E&O policies for architects and engineers are tailored to the needs of architectural and engineering firms and related businesses like land surveyors and construction managers. Similarly, E&O insurance for real estate sales agents, brokers, and appraisers is designed for them. When an industry-specific policy isn't available, insurers may opt for a miscellaneous E&O form, a generic policy tailored to a variety of small businesses and sole proprietorships. Other E&O policies concentrate on a specific type of risk that can affect a wide range of companies. Organizations of all sizes and in a wide range of industries, for example, purchase cyber liability insurance. It protects you from first-party and third-party losses caused by things like:

Breach of personal information
Malware
Attacks with ransomware and other security flaws

Another example is directors and officers (D&O) liability insurance, which protects corporate directors and officers from claims of breach of fiduciary duty, misappropriation of company funds, fraud, and other wrongdoing. D&O insurance is purchased by a variety of businesses, including public, private, and nonprofit organizations.

Costs of E&O Insurance on the Average

E&O insurance costs most small businesses between $500 and $1,000 per year. The amount a company pays is fixed by a number of factors, including:
Industry: Businesses in higher-risk industries pay more than those in lower-risk industries.
Company size and revenue: In general, the larger the company and the more revenue it generates, the more E&O insurance it will have to pay.
Broader coverage and higher limits are more expensive for businesses.
Loss history: Companies with a history of E&O claims will almost certainly pay more than those with no prior losses.
Rates differ depending on where you live. Furthermore, when E&O insurance is required by state law, the minimum required limit in some states may be higher than in others.

How to Save Money on Errors and Omissions Insurance

Because the cost of E&O insurance differs from one insurer to the next, it's a good idea to shop around. You can get quotes on the internet or have your insurance agent or broker do it for you. Here are some more ideas to assist you. save money on E&O insurance: To reduce errors in the workplace, implement the following quality control measures: There will be fewer claims if there are fewer errors. Safeguard confidential information: Reduce the chances of an unintentional release or a hacking event to avoid claims. Implement clear communication practices with clients: This can help avoid misunderstandings or miscommunications that can lead to claims. Increase policy deductibles: Just as with other types of insurance, a higher E&O deductible can result in lower premiums, which can be beneficial if you're worried about more expensive claims. Look for discounts: Some insurers will give you a discount if you or your employees have earned professional certifications or designations. Look for free add-ons: Some insurers may offer extra coverages, such as cyber liability, for a small or no additional fee.

Questions and Answers (FAQs)

Who needs Errors and Omissions coverage?

E&O insurance should be considered by any company that provides advice or sells a professional service. Designers, consultants, and financial advisors may be interested in purchasing an insurance policy. Certain professionals are required to have E&O insurance in some states.

What's the best place to get E&O insurance?

Many large insurers, such as Hartford, Nationwide, and Progressive, offer E&O coverage. It's also available from specialty insurers such as The Doctors Company, which specializes in medical malpractice insurance.