How to Compare Errors and Omissions Insurance Quotes

How to Compare Errors and Omissions Insurance Quotes
How to Compare Errors and Omissions Insurance Quotes

Mistakes can happen during tax filing or preparation of financial statements. Some of these errors can lead to penalties from the IRS or even jail time.

Errors and omissions insurance for accounting firms and accountants can protect accounting professionals from risks that may arise during the process of doing their jobs.

Before you buy errors and omissions insurance (E&O), think about things like how much it costs (premium pricing), how good the insurance company is (company ratings), and how much they'll cover (policy limits).

How to Find the Best Errors and Omissions Insurance (E&O)

To find the best price for something, you should check different options. For instance, before you get a new computer, you will compare prices and features, right? Well, insurance works the same way.

When you're shopping for errors and omissions insurance (E&O) or professional liability insurance, make sure to get quotes from different insurance companies. This way, you can check how much it costs and what they cover.

You don't have to be a pro to choose the right insurance. Just consider these six factors when you check your E&O insurance quotes.

1. Premium

The premium is how much you pay for your errors and omissions insurance for accountants. It's a big deal, but don't just focus on the price. You need to think about how much E&O insurance will cost and how well it will protect your business. If you choose a cheaper option, you might not have enough coverage, and you might have to pay a lot of money from your own pocket.

Remember that some parts of the policy are worth paying a bit more for, like the "duty to defend" rule explained later. Small businesses usually pay around $61 each month for their errors and omissions insurance premiums.

2. Deductible

The deductible is the money you have to pay first before your insurance helps you. You can often pick a bigger deductible to make your payments lower, but be careful with that choice.

Let's say you have to make a professional liability claim, and the deductible is too much money for you. In that case, your insurance won't cover anything. To pick the right deductible, ask yourself these questions:
  • What's the most I can pay each month? You should figure out how much you can spend on insurance, and make sure you have enough money saved up to cover your deductible in case you need to make a claim.
  • How likely is it that you'll be sued? If you have a lot of clients, the chance of getting sued is higher.
  • What's the potential cost of a lawsuit due to technology-related negligence? According to the World Intellectual Property Organization (WIPO), the average cost of going to court for technology-related disputes is $475,000. Most small tech businesses can't afford to pay this on their own.

This is a gentle reminder that insurance is there to help your business when it's in financial trouble. So, pick a deductible that you can manage to pay.

3. Insurance company rating

Insurance companies are usually given a rating from A to E, where A is the top rating. A higher rating means the insurance company is more financially secure. That's why I always advise my readers to buy errors and omissions insurance from a company rated A or higher.

Four agencies provide ratings for insurance companies:
There is no universal standard for rating insurance companies. Every agency has their own standard. So, if you see an A+ rating from one agency, it might not tell you everything you need to know.

When an insurance company shows only one rating, it's good to look into its other ratings. When you do this, make sure to focus on how they rate the company. For instance, an A+ is the second-best rating according to A.M. Best, but Moody's doesn't even use this rating.

4. 'Duty to defend' language

Check for the term "duty to defend" in the price quotes for your errors and omissions or professional liability insurance.If your insurance policy has that wording, it means your insurance company has to support you right from the beginning, even if it turns out the claim isn't covered at the end.

If your policy doesn't include that, it probably has a "non-duty to defend" clause, and this means you need to:
  • Handle the legal process
  • Choose your legal team
  • Cover the costs of your defense
If your E&O insurance doesn't make the insurance company handle the defense, it might be a bit cheaper, but you'll have to do a lot more if you get sued.

5. Payment options

When you're just getting started, you might not have much money, especially if your clients take a while to pay you. You might understand that your business needs errors and omissions insurance, but imagine you can't afford to pay the whole premium upfront?

Many insurance companies have payment plans that let you pay your premium in smaller monthly or quarterly installments. If it's important for your business to have more cash available, look for this option in your insurance quote.

6. Aggregate & per occurrence limits

Pay attention to the aggregate & per occurrence limits in your online insurance quotes. The "aggregate limit" is the most your insurance will pay during the entire policy period, while the "per occurrence limit" is the maximum for a single claim.

Imagine your E&O insurance has an aggregate limit of $1 million and a per occurrence limit of $1 million. This means it covers your first million-dollar lawsuit and also your second one. However, it's best to prevent another negligence lawsuit because those two cases have already used up your policy's maximum. Your E&O insurance won't cover another claim until it's renewed.

Conclusion: Get Free Insurance Quotes Online

Accounting firms can apply for insurance policy online to get the best quotes for errors and omissions insurance (E&O), which is also known as professional liability insurance for your business. When comparing quotes from different insurance companies, remember these six factors.

FAQs on How to Compare Errors and Omissions Insurance Quotes

Here are some frequently asked questions (FAQs) related to comparing errors and omissions insurance for accounting firms quotes:

1. What is Errors and Omissions (E&O) Insurance?

E&O insurance, also known as professional liability insurance, is a policy that protects professionals and businesses from claims of negligence or mistakes in their professional services.

2. Why is it important to compare E&O insurance quotes?

Comparing quotes helps you find the best coverage and pricing that suits your business needs and budget.

3. What factors should I consider when comparing E&O insurance quotes?

Key factors to consider include the coverage limits, deductibles, premium costs, carrier ratings, and the presence of a "duty to defend" provision.

4. How can I get E&O insurance quotes?

You can obtain E&O insurance quotes by reaching out to insurance providers directly, working with an insurance broker, or using online tools provided by insurance companies.

5. What are aggregate and per occurrence limits in E&O insurance?

The aggregate limit is the maximum amount your insurance will pay for all claims during the policy term. The per occurrence limit is the maximum it will pay for a single claim.

6. What's the significance of an insurance carrier's rating?

An insurance carrier's rating reflects its financial stability and ability to fulfill claims. A higher rating suggests a more reliable provider.

7. Are payment plans available for E&O insurance premiums?

Many insurance companies offer payment plans that allow you to pay your premium in installments rather than all at once.

8. What happens if I reach my policy's limit with claims?

Once your policy's limit is exhausted by claims, it won't cover additional claims until the policy is renewed.
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