How to compare errors and omissions insurance quotes

To get the right deal for any item, you need to shop around. For example, you probably wouldn't buy a new computer without first comparing the costs and features.

Insurance is no different.

When you shop for errors and omissions insurance (E&O), or professional liability insurance, be sure to get multiple quotes so you can compare costs and coverage options.

You don't need to be an expert to find the policy for you. Just consider these six factors as you review your E&O insurance quotes.

The premium is the amount you pay for your errors and omissions insurance, so this will obviously be a big factor in your decision. But don't make the mistake of only worrying about the price.

You must weigh the cost of the E&O policy against how much protection it will give your business. If you take a cheaper option, you could end up underinsured, and have to pay big money out of your own pocket.

Keep in mind that some policy features are worth a few extra bucks, such as the "duty to defend" provision described below.

Small businesses pay an average premium of $61 per month. Learn more about the cost of errors and omissions insurance.

The deductible is the amount you’re responsible for paying before your insurance benefits kick in. Most of the time, you can choose a higher deductible to lower your premium, but that option can get dicey.

For example, if you need to make a professional liability claim and the deductible is more than you can afford, your insurance won't pay for anything.

To select a reasonable deductible, ask yourself:

• How much can I afford to pay in any given month? You need to know how much premium you can afford, and how much money you need to have set aside to pay your deductible if you have a claim.
• What are the chances of being named in a lawsuit? The more clients you have, the more risk you have.
• How much could a technology-based negligence suit cost me? The World Intellectual Property Organization (WIPO) found that court costs for disputes over technology transactions average $475,000. Few small tech businesses can afford to pay that out of pocket. Read more about legal costs for consulting businesses.

Remember, the whole point of insurance is to keep your business afloat when it's threatened financially. Make sure you choose a deductible that you can afford to pay.

Insurance companies are typically ranked A to E, with A as the top rating. The higher the rating, the more financially stable the carrier. That's why you usually want to buy errors and omissions insurance from a carrier rated A or better.

Four agencies offer insurance company ratings:

• A.M. Best
• Standard & Poor’s
• Moody’s
• Fitch

Each agency has its own standards and system, so seeing an A+ from one agency may not give you the whole picture.

If an insurance provider only highlights one rating, you might want to research its other ratings. When you do, pay close attention to the rating system. For example, an A+ is the second highest score for A.M. Best, but it isn’t even an option for Moody’s ratings.

Look for the words “duty to defend” in your errors and omissions / professional liability insurance quotes.

An insurance policy with that language requires your insurance carrier to provide for your defense from the start, even if it turns out the claim isn’t ultimately covered.

Without that language, your policy most likely has a “non-duty to defend” provision, and that means you have to:

• Manage the litigation process
• Select your legal team
• Pay your defense costs

An E&O insurance policy that doesn’t require the insurance provider to handle the defense will likely be a little cheaper, but it means a lot more work for you if you're sued.

When you’re first starting out, money can be tight, especially if clients are slow to pay their invoices.

You may know you need to invest in errors and omissions insurance for your business, but what if you can't pay the entire premium at once?

Most insurance providers offer payment plans that spread your premium out over monthly or quarterly installments. Check your quote for this option if keeping more cash on hand is a priority for your business.

Make note of the aggregate and per occurrence limits listed in your online quote:

• Aggregate limit is the maximum amount your insurance will pay for the whole policy term.
• Per occurrence limit is the most your policy will pay for a single claim.

Let’s say your E&O insurance has an aggregate limit of $1 million and a per occurrence limit of $1 million. Your first million-dollar professional liability lawsuit is covered, as is your second. But you really want to avoid another negligence claim, because those two lawsuits put you at your policy’s threshold. Your errors and omissions policy won’t pay another claim until it’s renewed.

Apply online now with TechInsurance to get quotes for E&O insurance (also known as professional liability insurance) for your business, and keep these six factors in mind when you evaluate quotes from different insurance companies.