How insurance companies calculate E&O insurance cost/Professional Liability insurance cost
The price you’ll pay for professional liability insurance coverage is determined by several factors, including:
1. The type of work you do
Insurance companies set premiums based on the risk involved in your business. If your business offers professional advice, your risks will probably be higher. In general, jobs that are more likely to result in business errors or accusations of professional negligence often have higher professional liability insurance costs.
If you’re a yoga instructor, your insurance will likely cost less than insurance for an engineer.
2. The number of employees you have
Monthly expenses for a single consultant are likely going to be less than if you run a firm of multiple employees.
3. The state where you work
Different states follow different rules and regulations around insurance.
And the more populous the area where you work, it’s likely your insurance rates will be higher. A small business owner in a big city is more likely to pay more for insurance than one in a small town.
4. Your claims history
Your record of losses and insurance claims can have an impact on your insurance costs.
For example, if you’re an accountant and you’re accused of tax advice which results in a claim, you may see an increase in your premium when it’s time to renew your policy.
5. How high you set your limits
If you want to be covered for a broader set of damages, you can choose higher coverage limits on your insurance policy. However, higher limits will usually increase the cost of your policy.
6. Your years of experience
The number of years you’ve been in business in your industry can impact your insurance rate. Seasoned professionals often pay less than newcomers to an industry.
These are only a few common factors that can affect your costs. Insurance providers often take into account many other factors, including external economic conditions and market trends.
Note: It’s important to provide accurate information about your business when you get a professional liability insurance quote. This can help ensure you get the right coverage and avoid delays if you need to process a claim.
Examples of lowest monthly Professional Liability costs (Errors and Omissions costs) by profession
4 tips to help lower Errors and Omissions policy/Professional Liability insurance cost
You may be able to reduce your business liability insurance costs if you follow these suggestions:
1. Bundle more than one policy
NEXT can help you save up to 10% if you buy more than one policy. In addition to a professional liability policy, many businesses could benefit from additional business insurance coverage to help cover more risk. These could include:
- General liability insurance. General liability coverage could help cover you if a non-employee gets hurt at your place of business (known as bodily injury) or your business causes damage to property you don’t own.
- Commercial property insurance can help protect your business assets like inventory, equipment and furniture, and the physical location of your business, such as HVAC systems and building structures. It can also help protect your business income if you have to close for repairs after a covered event such as fire, theft or a natural disaster.
- BOP insurance (a Business Owner’s Policy) combines general liability with commercial property coverage — often at an additional savings.
- Workers’ compensation insurance, a requirement in most states, can help cover medical costs for employees who suffer a work-related illness or injury.
2. Keep your risk level low
Reducing risks at your business can help limit the likelihood of an accident and help keep your costs in check. Take precautions such as:
- Keep detailed, recorded notes and receipts around your work.
- Only accept work that you’re experienced enough to accomplish well.
- Develop and execute training programs for your employees.
- Create process checklists and reviews for important standard operations.
- Stay up to date on industry news, innovations and current best practices.
3. Choose the right policy limits and deductibles
Although lower limits can help save you money on your insurance, if you don’t have enough coverage you could be more vulnerable to financial loss.
If you want more protection from damages and incidents, higher coverage limits are often an option. However, they could result in a higher premium or a higher deductible.
4. Learn from previous claims
Analyze your previous insurance claims and learn what you could have done to avoid those risks. Take steps to ensure you can prevent these missteps from repeating.
