How insurance companies calculate Errors and Omissions insurance cost
Several factors help determine the cost of E&O insurance, including things such as:
1. The type of work you do
Insurance companies set premiums based on the level of risk tied to your services. If your business provides advice, handles client information or manages contracts, filings or transactions, your risk may be higher. Generally, jobs that are more likely to involve business errors, oversights, missed deadlines or accusations of negligence often have higher E&O insurance costs.
For example, an E&O policy for a notary will likely cost less than coverage for a real estate agent.
2. The number of employees you have
Monthly costs for a solo property manager are typically lower than for a business with multiple employees. A larger team of people involved in client work can increase the chance of mistakes or miscommunication. As your business size grows, your E&O insurance cost may increase.
3. The state where you work
Insurance requirements and regulations vary by state, which can affect pricing.
In more populous areas, insurance rates also tend to be higher. A business owner operating in a large city may pay more for an E&O insurance policy than someone working in a smaller town.
4. Your claims history
Your history of claims and losses can impact how much you pay for coverage.
For example, if you’re an insurance agent and a client claims an error you made in their policy documents caused them a financial loss, you may see higher premiums at renewal.
5. How high you set your limits
Choosing higher coverage limits can help cover a wider range of potential damages, but higher limits typically increase the cost of your policy.
6. Your years of experience
How long you’ve been working in your field can also affect your rate. Professionals with more experience often pay less than those new to an industry.
These are just some of the common factors that can influence E&O insurance costs. Insurance providers may also consider additional details, such as market conditions and broader economic trends.
Examples of lowest monthly Errors and Omissions insurance cost by profession
4 tips to help lower Errors and Omissions policy insurance cost
You may be able to reduce your business liability insurance costs if you follow these suggestions:
1. Bundle more than one policy
ERGO NEXT can help you save up to 10% when you bundle certain policies with E&O insurance. Along with errors and omissions coverage, many businesses choose additional policies to help protect against more risks. These may include:
- General liability insurance. General liability coverage can help cover claims if a non-employee is injured at your place of business or if your business causes property damage to other people’s property.
- Commercial property insurance. This policy could help protect your business assets, such as inventory, equipment, furniture and your office space — even if you work from home. It can also help protect your income if you need to temporarily close for repairs after a covered event, like fire, theft or certain natural disasters.
- Workers’ compensation insurance. Workers’ comp is required in most states and can help cover medical expenses and lost wages if an employee experiences a work-related injury or illness.
- Cyber liability insurance. This coverage, an optional add-on to general liability or your E&O policy, may help cover costs related to data breaches, cyberattacks or other incidents involving sensitive client data like financial information.
- BOP insurance (a Business Owner’s Policy). A BOP combines general liability and commercial property coverage into one policy, often at a lower cost than buying two policies alone.
2. Keep your risk level low
Reducing risk in your business can help limit the chance of an error or oversight and may help keep your insurance costs in check. Steps that may help include:
- Keep clear, detailed records of your work, including notes, contracts and receipts.
- Only take on projects you’re qualified and experienced enough to handle.
- Train employees on your processes and client communications.
- Use checklists and review steps for key tasks, filings or deliverables.
- Stay current on industry regulations, standards and best practices.
3. Choose the right policy limits and deductibles
Lower coverage limits may reduce your small business insurance premium, but they can also leave your business more exposed if a client claims financial harm.
If you want broader protection, higher limits are often available. Keep in mind that choosing a higher deductible may lower your monthly premium, but it can increase what your out-of-pocket costs are if a claim is filed.
4. Learn from previous claims
Review any past claims to understand what went wrong and where processes may have broken down. Making adjustments based on those experiences may help reduce the chance of similar E&O-related issues in the future.
