Professional liability insurance—also referred to as errors and omissions insurance or E&O Insurance—protects your business if you make professional mistakes or errors in your work. If an engineer draws plans for a house and an error is made, it can impact the structural integrity of the home and costs thousands of dollars to repair. Likewise, if a dietician recommends a dietary plan that inadvertently harms their client, they could be held liable. That's why your small business needs to obtain the right business insurance to safeguard yourself from liability claims.
What Impacts the Cost of Professional Liability Insurance?
Insurance costs for errors and omissions insurance will be impacted by some of these factors:
- Industry/profession: The services you offer will impact the cost of business insurance. For example, an engineer will likely pay more than an accountant because of the risks they face. The general rule of thumb is if your industry has a higher risk of a lawsuit being filed against you, your professional liability insurance cost will be more. An insurance company will also look at the potential cost of a lawsuit, settlement, etc. in your industry.
- Location of your business: How much you pay for E&O insurance is also determined by the location of your business. Business owners whose locations have a higher population or increased numbers of claims will have higher costs for insurance.
- Number of employees: The more employees you hire, the higher the risk potential is for claims, and the more it will cost your company.
- Years in business: If you’ve been in business for a long time, have a good reputation and few claims, your risk of a future claim is lower—so you may pay less for coverage.
- Claims history: A history of claims will negatively impact your pricing. The fewer claims that have been brought against you, the more likely it is you’ll get a better quote for your premium.
- Insurance carrier chosen: Costs will vary from one company to the next, which is why it's important to work with an agent to get multiple quotes.
Most small businesses pay between $500–$1,000 annually for professional liability insurance, landing the average around $750 a year. Progressive claims that their average customer pays $46 per month for coverage. Hiscox shows the average yearly price professional liability insurance for an IT consultant as $441 and for business consultants the policy can cost $779. A smaller percentage of businesses pay above or below that amount. These prices are typically for policy limits of $1 million per claim and $1 million maximum during the lifetime of the policy (usually per year).
How Policy Limits Affect the Cost of a Professional Liability Policy
The higher the policy limit for your professional liability insurance, the more you'll pay for the policy.
- The average premium for a $500,000 limit is around $650 annually
- The average cost of a $1 million policy is around $750 per year
- You can expect to pay around $930 a year for a $2 million policy
The policy limits and the amount of coverage necessary are determined based on your specific business. We recommend speaking with a licensed insurance agent to determine the coverage limits you need and what you can expect to pay for errors and omissions insurance.
How a Small Business Can Save on Professional Liability Costs
Small business owners can do a few things to decrease their business insurance costs:
- Pay your premium upfront: Many insurance companies offer a small discount if you’re able to pay an entire year's premium immediately. Or, you can opt to pay per month and pay slightly more for professional liability coverage.
- Choose annual coverage over event coverage: It’s more cost-effective to hold an annual policy versus starting and stopping coverage for each project you’re working on.
- Increase your deductible: If you can afford to pay a higher deductible per occurrence, it will reduce the cost of your premium.
Get a Free Professional Liability Insurance Quote
Tivly strives to serve small and medium-sized businesses and help you get the insurance coverage you need. Don't risk not having insurance coverage. Call us at 877-907-5267 and we will help you find the insurance coverage you need at a cost you can afford.
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