Comparison shopping, risk management, and choosing a policy with a high deductible can reduce the cost of errors and omissions insurance. Learn details about these tips and more.
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. So, is it possible to get 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 in your professional work and also in your business budget.
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.
Remember, 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, while an expensive policy may be unnecessary for a low-risk business.
Working with a knowledgeable insurance agent can end up saving you money. 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 try to purchase coverage without expert help, you might not know whether the policy in front of you is too much or not enough.
This advice might sound odd at first – if you can avoid claims, why have errors and omissions insurance at all? However, you don’t want to rely on your policy alone to protect you. Letting avoidable claims pile against your business will 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 accident and need to cover the costs of car repairs and medical treatments. But if you frequently have smaller claims on minor accidents, your rates are going to increase.
Similarly, frequent errors and omissions claims will cause your premiums to rise. Moreover, insurance companies are reluctant to insure a business with a lengthy record of mistakes and claims, unless that business is willing to pay a high premium for coverage.
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 trade-off is that in the event of a claim, your business is responsible for a larger share of the payment.
A higher deductible might be worth it if your main concern is a highly unlikely but very expensive claim. If 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.
Complete Insureon’s easy online application today to compare errors and omissions insurance quotes from top-rated U.S. companies. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.