6 Things to Look for When Comparing Technology Errors & Omissions Insurance Quotes
You know that shopping around makes sense if you want to get the best price on any item. For example, you probably wouldn’t buy a new computer without taking a look at the different options available. That same principle applies to insurance.
When you shop for technology Errors and Omissions Insurance, be sure to get multiple quotes so you can compare costs and coverage options. You don't have to be an insurance expert to do that, either. Just consider these six key pieces of information in your E&O quotes.
Your premium is the amount you pay for your Errors & Omissions Insurance, so this is naturally your first point of comparison. However, don’t get suckered into only worrying about the price. The goal is to weigh the cost of the E&O policy against the protection it affords your tech business. You don't want to take a cheaper option if it leaves you underinsured – unless you want to pay your legal bills out of pocket.
Keep in mind that some policy features are worth a few extra bucks (e.g., a "duty to defend" provision – we'll get to that in a bit). Learn more in “3 Factors that Affect the Cost of Your Technology Errors and Omissions Insurance.”
The deductible is the amount you’re responsible for paying before your insurance benefits kick in. Most of the time, you can choose a higher deductible to lower your premium, but that option can get dicey. For example, if you need to make a claim and the deductible is more than you can afford, you can't collect on your coverage.
To select a reasonable deductible, ask yourself…
- How much can I afford to pay in any given month? This can give you perspective on the premium you can afford and how much money you can spare at any given time to pay your deductible.
- What are the chances of being named in a lawsuit? The more clients you have, the more risk you have.
- What is the average cost of a technology-based negligence suit? The World Intellectual Property Organization (WIPO) found that court costs for disputes over technology transactions average $475,000 – not a bill most small tech businesses can afford out of pocket. See our resources page for more details.
Remember, the whole point of insurance is to keep your business afloat when it's threatened financially. Make sure to choose a deductible that doesn't jeopardize your financial security.
3. Carrier Rating
Insurance carriers are typically ranked A to E, with A as the top rating. The higher the rating, the more financially stable the carrier is. That's why you usually want to buy Errors and Omissions Insurance from a carrier rated A or better.
Four companies offer insurance carrier ratings:
- A.M. Best.
- Standard & Poor’s.
Each company has its own standards and system, so simply seeing an A+ from one company may not give you the whole picture. If a carrier only highlights one rating, you might want to research its other ratings. When you do, pay close attention to the rating system. For example, an A+ is the second highest score for A.M. Best, but it isn’t even an option for Moody’s ratings.
4. “Duty to Defend” Language
Look for the words “duty to defend” in your Errors and Omissions quote. An insurance policy with that language requires your insurance carrier to provide for your defense from the start – even if it turns out the claim isn’t ultimately covered. Without that language, your policy most likely has a “non-duty to defend” provision, and that means you have to:
- Manage the litigation process.
- Select your legal team.
- Pay your defense costs.
An E&O policy that doesn’t require the insurer to handle the defense is probably going to be a little cheaper, but it signs you on for a lot more work when you're sued.
5. Payment Options
When you’re first starting out, money can be tight, especially if clients are slow to pay their invoices. You may know Errors and Omissions Insurance is the right investment for your tech business, but what are your options if you can't pay your premium in one fell swoop?
Most insurance providers offer payment plans that spread your premium out over monthly or quarterly installments. Check your quote for this option if keeping more cash on hand is a priority for your business.
6. Aggregate and Per Occurrence Limits
Make note of the aggregate and per occurrence limits listed in your quote:
- Aggregate limit is the amount your insurance can pay for the whole policy term.
- Per occurrence limit is the most your policy can pay for a single claim.
Let’s say your E&O Insurance has an aggregate limit of $2 million and a per occurrence limit of $1 million. Your first million-dollar lawsuit is covered, as is your second. But you really want to avoid another negligence claim because those two lawsuits put you at the policy’s threshold. Your Errors and Omissions won’t pay another claim until it’s renewed.
Apply now to get technology E&O quotes for your business, and keep these six factors in mind when you evaluate your quotes.