Errors and omissions insurance protects your small business from the financial risks of professional mistakes. Your industry, as well as the scope of your professional practice, will affect the cost of coverage.
Regardless of policy limits, the median annual cost of errors and omissions insurance is about $710 ($60 per month). The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of business insurance because it excludes outlier high and low premiums.
Most small business owners (51%) pay between $500 and $1,000 for their policies, and 18% pay less than $500. These figures were derived from an analysis of thousands of insurance policies purchased by Insureon small business customers.
Your industry impacts the cost of liability insurance since different professionals are exposed to different liabilities. Higher risk professions pay more for errors and omissions insurance than lower risk businesses.
For example, IT professionals pay a median premium of $730 per year, while finance and accounting professionals pay just $400 per year. An error in a building design project could lead to a significant loss for a client, which explains the high annual premium of $1,705 for building design professionals.
The claim limit on common errors and omissions policies varies significantly, from $250,000 to $2 million. However, most Insureon customers (61%) purchase a $1 million / $1 million policy. This includes:
$1 million occurrence limit. While the policy is active, the insurer will pay up to $1 million to cover any single claim.
$1 million aggregate limit. During the lifetime of the policy (usually one year), the insurer will pay up to $1 million to cover all claims.
If your business needs an errors and omissions policy that pays out more per incident or per year, then you’ll need to purchase a more robust policy with a higher premium.
Pay your entire premium upfront. You can choose to pay insurance premiums once a month or once a year instead of a monthly billing cycle. While making a smaller payment each month requires less money upfront, it often costs more since insurers often offer discounts to businesses that pay an annual premium.
Keep continuous coverage. While it’s possible to purchase professional liability coverage when you start a project and drop coverage when you complete the project, this cost-cutting strategy can backfire. To collect insurance benefits, your “claims-made” professional liability policy must be active:
In short, continuous coverage is key if you don't want to pay out of pocket for professional liability lawsuits. Learn more about claims-made insurance coverage.
Your overall insurance costs depend on which types of insurance you buy. Learn how much other small business insurance policies cost: