Errors and omissions (E&O) insurance is a form of liability insurance that can protect your business in the event that you are sued for errors or omissions in your services. With E&O insurance, both employers and employees are covered against a wide range of costly expenses, such as legal fees and settlements. When comparing E&O policies, many business owners want to know how much insurance is going to cost. This is dependent on multiple factors, such as your location, industry and the size of your business. So, how much does errors & omissions insurance cost and where can you get a policy for your organization?
Factors that Influence the Cost of E&O Insurance
While cost should not be the only factor you consider when choosing an E&O insurance policy, it is an important one nonetheless. Every business has a budget, and by choosing a policy that fits into your budget, you can continue normal operations without disruption. When comparing errors and omissions insurance policies, here are just a few things that will influence the cost of your policy.
The Size of Your Business
Some businesses face larger risks than others due to their size. A business that has a higher number of employees is inherently taking a bigger risk than a business with just a few employees. With more employees, there is more of a chance that a mistake will be made or inadequate service delivered, especially if you have new, untrained employees coming in on a regular basis. This is why businesses with more employees tend to have higher insurance rates than those with fewer employees.
Yearly Business Revenue
When getting quotes for errors and omissions insurance policies, you will need to provide proof of your yearly business revenue. Why is this information important? Because businesses that make more money are more likely to face lawsuits. Many times, an attorney will not recommend going after a business if they do not have any money to hand over in the event of a successful settlement. Businesses that are doing financially well face a higher risk of getting sued, meaning their E&O insurance policy will likely be higher.
Type of Industry
While businesses in all industries face some level of risk, some industries are much riskier than others. For example, an IT professional could install software on business computers that result in major data loss. Or a contractor could undergo a roof replacement and cause extensive property damage in the process. If your business is in an industry that faces a higher number of risks, you can expect your E&O insurance rates to be higher to cover these risks.
History of Claims
Facing one lawsuit from a previous client or customer can be devastating for a business, but when more than one occurs over the life of a business the consequences can be even more serious. When providing a quote for errors and omissions insurance, the insurance carrier will take into account how many lawsuits have been filed against your business in the past. If your organization has had one or more lawsuits previously, you can expect a higher rate compared to a business that has faced no prior lawsuits.
While there are many factors that can influence the cost of errors and omissions insurance, the location in which your business is present is one of the most influential factors. Some states in the U.S. have higher minimum coverage requirements, which means that these states generally have higher insurance rates. If you have businesses in multiple states, you may find that the cost of your E&O insurance policies differs based on the coverage requirements in that particular region.
Based on your unique business and all of the other influential factors previously mentioned, you may need more or less coverage than another business. If you need more coverage than the average business due to your company facing higher risks, then you can expect to pay more for E&O insurance compared to businesses that have policies with lower coverage limits. Speak with an experienced business insurance broker to determine how much coverage you will need to keep your business well protected.
Speak to Professional Business Insurance Brokers
As a growing business, it is important to maintain a strict budget, which means paying attention to how much you spend on insurance. While not required in all states, errors and omissions insurance can be highly valuable to businesses that provide their expertise as a service to clients or customers. E&O insurance can be highly affordable and well worth the expense to protect your business against potential lawsuits. To receive a quote for errors and omissions insurance based on your unique business size and risks, reach out to the professional business insurance brokers at John M Glover.