The Cost of the Errors and Omissions Insurance Premiums

Errors and Omissions (E&O) Insurance protects your company from claims against your professionalism. It covers the legal defense expenses you incur during the lawsuit and may even prevent your company from bankruptcy. Depending on your profession, you may even be obligated to acquire one. Not all professionals pay the same premiums, however. It will pay off in the long run if you had the basics of your industry’s insurance costs.

Here are the factors that determine the cost of E&O Insurance for your company’s assets:

Business Size

Larger companies are more prone to facing multiple claims at once. This is especially true the more employees you have because it leads to a higher probability of human error. For these reasons, you may be charged more for your E&O Insurance. So, if you have them, double-check whether the independent contractors you’ve hired have their own insurance policies too. You may want to include them in your employee count to stay on the safe side.

Insurance companies require businesses to show evidence of their yearly income before finalizing the quote for your E&O. At times, this may also include the accumulated hours worked and the kinds of clients you work with. Earning a higher revenue often translates into paying a higher cost given that your company is more likely to get lawsuits from unsatisfied customers.

However, you may lower the cost of E&O Insurance by teaching your employees how to conduct themselves professionally and work according to company standards. The number of years individuals have worked in the industry is also oftentimes translated into the quality of work performed. This means that smaller premiums are billed to long-established and more experienced professionals.


There are two main determinants insurance providers review in each industry. The first revolves around how often companies may face claims against them. Keep in mind that some industries have lower litigation rates than others and, consequently, pay lower premiums overall. The second factor is how expensive these claims are to resolve.

Companies in industries whose errors may cause property damage are charged higher E&O Insurance costs. For instance, insurance policies for medical professionals are more expensive given that the amount will be consumed in the event that they face critical malpractice lawsuits.

Policy Limits

Your business is expected to pay applicable deductibles before your E&O Insurance may be considered effective. These may be the:

  • Defense-And-Loss (DL) Deductible – which is applied to paid claims and defense costs (the attorney’s fees, researching and preparing case files, responding to the lawsuit, etc.); and
  • First-Dollar-Defense (FD) Deductible – which is only paid when judgment on a claim is final.

Meanwhile, Errors & Omissions Insurances also have the following coverages:

  • Occurrence Limit – is the maximum amount of payout you can expect for a single claim.
  • Aggregate Limit – represents the total coverage an insurance company will pay out during the policy’s validity period.

Other Factors


Location – insurance costs vary between states and regions. Some areas may also have minimum coverage requirements. Consider your area’s population density as well as more heavily-populated areas usually cost higher premiums.

Frequency of Payment – premiums are more expensive when they are paid monthly. Consider accommodating an annual payment plan in your budget instead.

Type of Insurance Provider – Insurance companies and insurance trusts make different offers. Be sure to compare quotes from each kind as they will likely have different guidelines, coverages, and requirements.

Coverage Limit – has a direct relationship to your premium. Bigger companies may opt for higher premiums to secure higher coverages.

Policy Features – some insurance providers may allow you to customize your premium to include other coverages. For instance, smaller businesses may choose to pay an additional premium for cybersecurity insurance. This helps cover financial losses from cyber activity such as the damage or loss of data.

Number of Previous Claims – having disciplinary records or an overall bad history with insurance claims also increases your required premium payment. Insurance companies will begin by determining your loss ratio, that is, the amount you have lost from your premiums in the last five or six years. These may include payments for damages to a claimant and the respective attorney’s legal defense fees.

Getting an E&O Insurance for Your Business

The cost of your Errors and Omissions Insurance can only be truly determined after getting a professional quote. However, rest assured that with E&O Insurance, you can avoid paying out-of-pocket for expensive claims and lawsuits.

Additionally, you can even gain assistance in securing a competent legal defense attorney to handle your case and paperwork. Reach resolutions efficiently and resume your usual work operations as soon as possible by consulting with insurance professionals to determine a premium plan that works for your company and employees.

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