One of the biggest factors contributing to the cost and necessity of Errors and Omissions Insurance is the specific type of occupation of the insured business owner or professional. Some jobs inherently exhibit a larger exposure to lawsuits. In fact, there are specific kinds of Errors and Omissions Insurance just for certain professionals. Doctors and other medical professionals purchase Medical Malpractice Insurance as a way to protect against lawsuits due to their Errors and Omissions risk. Other types of businesses, such as law firms, may find this coverage called a Professional Liability Insurance Policy.
In general, any profession where a mistake on the part of the insured or an employee or contractor could substantially affect its client is a candidate for Errors and Omissions Insurance. Professions that deal with financial services, such as insurance agents and financial planners, often need Errors and Omissions Insurance because of the substantial amount of money they handle for clients. Architects, engineers, and other professionals in the building trades may also have a large Errors and Omissions exposure because mistakes on their part could be catastrophic for clients who are depending on them to build structures correctly and on time.
Some professions have a smaller exposure because the cost of any individual job is less significant, and lawsuits are less common. Examples of these trades are Web designers, advertising agencies, public relations firms, and graphic designers. However, depending on the size of the business and of the clients it serves, the exposure may actually be larger than one might think, and almost any lawsuit could bankrupt the business.
For underwriting purposes, the type of occupation that the insured is engaged in will be a primary driver of the cost and scope of the policy. The most common doctor’s policy provides $1 million per occurrence of up to $3 million per year, and it is not uncommon for doctors in certain specialties and in high cost regions to pay tens of thousands, or even hundreds of thousands of dollars each year in premiums. A study by the United States General Accounting office noted that in some expensive communities insurance for obstetricians can cost over $200,000 a year. In contrast, a Web designer with annual revenues of $150,000 can obtain a $1 million Errors and Omissions policy for $1000 to $1500 per year.
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