How Much Does Errors and Omissions Insurance Cost?
Errors and omissions insurance (E&O Insurance)—also referred to as professional liability insurance—comes into play if you make errors and/or professional mistakes in your business. If an attorney makes an error in a lawsuit that costs you thousands of dollars in fines—they can be held liable. If an architect makes an error in their plans, it can cause severe structural and property damage to a building or seriously injure someone. If you make any mistake in your business, how much can you afford to cover? Will a lawsuit bankrupt your small business? That's why you need to get the right insurance to safeguard your business.
What Impacts E&O Insurance Cost?
Insurance costs for errors and omissions insurance will be impacted by some of these factors:
- Industry/profession: Generally speaking, if your industry has a higher risk of a lawsuit being filed against you, your errors and omissions insurance cost will be more. An insurance company that knows what they're doing will also look at the cost of a lawsuit in your industry to know what they might have to pay out in a settlement.
- Location of your business: How much you pay for E&O insurance can also be determined by where your business is located. If your business is located in a highly-populated area, you may have higher costs for insurance.
- The number of employees: The more employees that work for your business, the more it will cost your company. (E&O coverage is often calculated per employee).
- Years in business: If your business has a good reputation and few claims in the years you've been operating, it means that your risk of a future claim is pretty low—so E&O insurance may cost less.
- Claims history: Have you filed a lot of insurance claims? This will negatively impact your insurance costs. But you’ll get a better quote for your premium if you have fewer claims on record for your business.
- Insurance company: It's important to work with a professional to get multiple quotes because costs will vary between different insurance companies.
Most small businesses pay between $500–$1,000 per employee per year for errors and omissions insurance, landing the average around $750 a year. Other companies claim that the average is closer to $1,735 a year or between $900–$2,000 for errors and omissions policies. A smaller percentage of businesses pay above or below that amount. These prices are typically for policy limits of $1 million per claim/$1 million aggregate during the lifetime of the E&O policy.
Policy Limits Impact the Cost of Errors and Omissions Insurance Policies
The cost of an errors and omissions insurance policy increases as you choose higher limits on your policies.
- The average premium for a $500,000 limit is around $650 annually
- The average cost of a $1 million policy is around $750 per year
- You can expect to pay around $930 a year for a $2 million policy
The amount of coverage that's necessary for professional liability insurance is determined based on your specific business. We always recommend that you speak with an insurance agent to determine the coverage limits you need and what you might pay for an errors and omissions insurance policy.
How You Can Save on Errors and Omissions Insurance Costs
Small business owners can do a few things to decrease their business insurance cost:
- Pay your annual premium upfront: If you’re able to pay an entire year's premium immediately it can be a great way to save many. An insurance company will often give you a discount if you're able to do so.
- Choose annual coverage: Even though many insurance companies offer per event policies, it’s more cost-effective to choose an annual policy.
- Increase your deductible: Can you afford to pay a higher deductible per occurrence? If so, it can reduce your premium.
Sometimes, you can save money on your insurance by bundling different policies with the same company. If you purchase a business owners' policy (which includes general liability insurance, commercial property insurance, and business interruption coverage) in conjunction with E&O insurance it may lower your annual premiums. If you're already in the market for this coverage, speak to an agent about bundling options.
Get a Free Errors and Omissions Insurance Quote
At CommercialInsurance.Net, we strive to help small and medium-sized businesses get the insurance coverage you need at a price you can afford. If your employees make a mistake, the cost of errors can bankrupt a small business. Call us at 877-907-5267 and we will help you find the insurance coverage you need at a cost you can afford.
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