How to Keep Errors and Omissions Insurance Costs Low
Even though you understand how essential Errors and Omissions Insurance is, chances are you don't want to spend more on the policy than you absolutely have to. After all, you have a business to run and your budget is tight enough already. Is there a way you have your cake and eat it too by getting adequate E&O coverage at an affordable rate?
Here's how you can find E & O coverage that won't break the bank, giving you peace of mind when you do a job and peace of mind when you take out your checkbook.
1. Compare quotes from multiple providers.
Just like when you buy a car, a camera, or any other major purchase, it pays to shop around. There are a number of insurance carriers that offer Errors and Omissions policies, and some might fit your business's needs better than others. Some carriers may even specialize in serving your industry and offer more affordable policies with tailored protection.
However, cheaper isn't always better. You'll want to find a balance between coverage and cost, maximizing your protection while minimizing your premiums. A cheap policy might not offer enough protection for your business, but an expensive policy might not necessarily meet your needs, either. For more on that, read about E & O quotes and estimates.
2. Work with an agent who gets your business.
There's a reason you go to a dentist for a toothache or an accountant for tax returns. You want somebody with the knowledge and expertise to address your problem. It's no different for insurance. In fact, working with a knowledgeable insurance agent can end up saving you money. (Read more on finding a helpful E & O insurance agent.)
An insurance agent who is familiar with your industry's liabilities is more likely to get you the insurance policy that fits your risks and budget. They know the limits you need and the add-ons you can do without. If you fly solo, you might not know whether the policy in front of you is too much or not enough.
3. Keep your claims history clean.
This advice might sound odd at first – if you can avoid claims, why have Errors and Omissions Insurance at all? The fact is you don’t want to rely on your policy alone to protect you, and letting avoidable claims pile against your business will only raise your premiums and make you more of a risk in the eyes of the insurance company.
It helps to think of your E&O Insurance as you would your auto insurance. It’s valuable if you ever get into a serious wreck and need to cover the costs of your totaled car and medical treatments. But if you frequently have smaller claims like fender benders, your rates are only going to increase.
Similarly, frequent Errors and Omissions claims will cause your premiums to rise, too. Moreover, insurance companies are reluctant to insure a business with a lengthy record of mistakes and claims, unless that business is willing to pay an arm and a leg for coverage.
4. Choose higher deductibles.
A deductible is the amount of money you must pay toward a claim before your insurance benefits kick in. Say a claim (e.g., an E & O lawsuit) costs a total of $50,000 and your deductible is $5,000. The insurance policy can cover the remaining $45,000 after you pay your portion.
When it comes time to choose an insurance policy, the deductible should be an important factor in your decision. In general, higher deductibles mean lower premiums. The tradeoff is that in the event of a claim, your business is responsible for a larger share of the payment. This might be worth it if your main concern is a highly unlikely but very expensive claim. In the off chance that it does occur, the amount you pay as a deductible might be insignificant compared to what the insurance policy covers. In return, smaller claims might not be covered.
Now that you know some insider tips on cutting down your E&O costs, let's put your new skills to work. Fill out an online application today to start comparing quotes from multiple insurance providers.