Choosing the right errors and omissions (E&O) insurance policy can be a difficult task for both experienced and uninitiated professionals. These policies can be highly tailored, which means that choosing the ideal option can require extra effort. If you are preparing to buy E&O insurance, make sure to consider the following factors before you commit to a policy.
Your Relative Risk
Your errors and omissions insurance cost and coverage should reflect the level of risk inherent to your work. Do you provide services that are time-intensive, expensive or likely to significantly affect the lives of your clients? Do you rely on a large number of employees or contractors who may be prone to occasional mistakes or omissions? If so, you may face a higher risk of claims.
You also should weigh what you can afford now against what you can risk losing later. If you have a history of claims or work in an industry where claims occur often, you may need to pay higher premiums to secure full coverage. At the same time, the expenses associated with E&O claims often significantly exceed what professionals can afford. Considering this, committing to a higher upfront errors and omissions insurance cost may be the best option.
When choosing your policy, it is important to realistically assess your level of risk and financial need. It can be easy to ignore the possibility of worst-case scenarios, but these are the situations when strong insurance coverage is needed most. In many cases, taking a cautious approach may be preferable to leaving yourself under-protected in these situations.