If your business provides professional advice or services, you should look into errors and omissions insurance (E&O), also called professional liability insurance. This policy can help defer the costs of lawsuits, even if you’ve done nothing wrong, and costs about $60 per month.
If you provide professional services that affect a client’s profits, choosing higher limits could be a smart business decision. It’ll cost more, but also cover more expensive claims.
As you can see in the chart below, there’s a direct correlation between how much you pay and your coverage limits.
Read more about how much cyber liability coverage you need.
Your type of business and its size influence the cost of E&O/professional liability insurance. Your insurance company will also look at:
If your mistake costs a client money, you may have a lawsuit on your hands.
IT consultants, project managers, software developers, and others whose work directly impacts a client’s bottom line are at risk of E&O lawsuits. That means they’ll likely pay more for this insurance policy.
For example, a software developer could miss a bug in a client program. When the bug surfaces and crashes the client’s system for three days, the client could sue to recover lost profits and other costs.
Consultants and others who provide expert advice face similar risks. If your recommendations don’t produce the desired results, you could also be taken to court.
The amount of risk determines the cost of errors and omissions insurance that includes cyber liability insurance. For example, cybersecurity companies and businesses with sensitive digital assets pay more for this coverage.
Cyber insurance costs depend on the amount of data and the number of employees who can access it. It’s simple math: more people accessing more data increases the chance of a data breach.
Choosing a higher deductible is an easy way to save on your premium. Most TechInsurance customers opt for a deductible of $1,000 for E&O insurance.
But make sure to choose a deductible you can easily afford. If you can’t pay it, you can’t collect on a claim.
Your insurance company will charge more to protect you if you’ve cost them money in the past. That’s why you need to answer questions about liability claims when you apply for this policy.
It’s easy to save money on your E&O policy without compromising on coverage. For instance, you can:
Pay your premium in full. Your insurance company will ask if you want to pay your premium annually or in monthly installments. The annual premium costs less than paying month by month.
Reduce your risks. It’s unfortunate but true, claims on your insurance make your premium go up. The good news is, you can reduce some risks to avoid claims and keep your premium low.
A good risk management strategy to reduce E&O claims includes:
You can’t eliminate risk. If that were possible, insurance companies would be out of business. But risk management helps you sidestep common pitfalls that lead to insurance claims and higher errors and omissions (professional liability) insurance costs.
View our small business insurance cost overview or find out how much you can expect to pay for common types of business insurance.