What Is Errors and Omissions Insurance?
You put a lot of effort and focus into your business and work. But mistakes can happen and it’s best to be prepared in case it results in a lawsuit. Professional Liability Insurance
, commonly known as Errors and Omissions Insurance
(E&O), helps protect your company against claims that a service your business provided caused a client to experience financial harm because of errors or omissions. The lawsuits, which can be filed even if your business didn’t do anything wrong, can be costly to defend. Coverage helps pay for the cost to defend your business as well as any settlements from the lawsuit.
The cost of Errors and Omissions Coverage varies from company to company and is impacted by different factors. Errors and Omissions Coverage can be a small cost to pay to protect your business from legitimate and frivolous lawsuits.
Learn more about Errors and Omissions Insurance below.
How Much Does Errors and Omissions Insurance Cost?
Rates for Errors and Omissions Coverage differ from business to business. There are different factors that affect how much coverage will cost the business. For example, a business with fewer employees may have a lower rate than a company with hundreds of employees.
Here are some factors that can impact the rate for Errors and Omissions Coverage:
The size of the company – the more employees a business has, the higher your risk is. So if your Errors and Omissions policy is covering more people, the higher the rate could be.
Your company’s revenue – as your business generates more revenue, there can be an increased level of risks for lawsuits to be filed against your company.
The industry your company is in – if your company is in an industry where a mistake could cause significant harm, it increases the risk of a lawsuit filed against it. For example, a construction company may see higher Errors and Omissions rates because a mistake in the work could result in property damage and bodily injury.
Employee training – if there’s a policy in place that teaches employees how to manage risks and aims to reduce mistakes, this could have an impact on your insurance rate. Generally, the more trained your employees are, the lower your risk for liabilities.
Contracts – depending on how contracts are written, they can either increase or decrease a business’s exposure to liability. If a construction company’s contract specifies the use of subcontractors, for example, the Errors and Omissions Coverage rate could be impacted.
Where your business is located – if the state your business operates in has specific requirements, the insurance policy will change to satisfy those needs. A state may require a minimum policy limit, for example. Some states may also be more open to lawsuits compared to others, which could result in a higher insurance rate.
History – if your business has a history of lawsuits, you likely will have a higher Errors and Omissions insurance rate. A history of lawsuits means there’s increased risk with your business.
Coverage Limits – an Errors and Omissions Coverage policy with a higher limit is likely to have a higher rate than a policy with lower coverage limits.
Examples of How Much Errors and Omissions Insurance Costs
The average costs for Errors and Omissions premiums is dependent on a variety of factors, so your Errors and Omissions insurance rate could be higher or lower than the average. The size of your company, the industry it’s in, where it’s located, and other factors all contribute to the rate.
A good estimate for Errors and Omissions Coverage cost is about $500 to $1,000 a year to cover one person. If your business has employees, you use the estimate to get an idea of how much it may cost to cover your company. For example, if your business has 50 employees, your Errors and Omissions premium may be $25,000 to $50,000. Don’t forget that other various factors are taken into consideration for an insurance rate, such as location, type of business, and history.