Technology errors and omissions insurance costs can vary greatly depending on a multitude of factors. Find out what influences the premium rates.
E&O insurance is essentially insurance for malpractice. Businesses across all industries, such as law, accounting, and hospitality, utilize E&O insurance. This ranges from Fortune 500 enterprises to small-to-medium-sized businesses. In today’s age where remote work is becoming the norm, technology and SaaS companies are also increasingly relying on E&O insurance.
Let’s say you own a web design service. An e-commerce client enlists your service with a written agreement that the website will be up and running by the peak holiday shopping season. Due to unforeseen circumstances, you’re unable to get the site up by the contractual deadline. As a result, the client loses out on potentially thousands of dollars in holiday sales. This leaves your business ripe for a lawsuit.
All it takes is a single successful lawsuit to drive a small company out of business and into bankruptcy. For larger corporations, it could lead to a massive budget loss, resulting in layoffs, reduced hours, and other cutbacks.
E&O insurance covers your legal costs, settlements, and payoffs to plaintiffs.
E&O insurance costs vary by industry. Some industries are deemed a higher risk than others and incur higher premiums. Here’s a cost breakdown by sector.
Policy rates can vary significantly depending on a combination of multiple factors. Consider the following:
Successful businesses with a higher revenue may be subject to higher coverage rates. Clients are more likely to seek a high monetary claim against larger companies since they have the revenue to pay higher settlements.
Insurers may lower rates for companies that have an established and organized training program in place. This includes mandatory refresher courses. Well-trained employees are less likely to make a critical error that can lead to a lawsuit.
The more employees and clients you have, the greater your risk of a lawsuit. Depending on your industry, you may pay a per-employee rate. For example, you may pay $400 per year for every employee on your roster.
Does your company draft a lengthy contract per client project? Business lawsuits largely come down to the conditions outlined in the contract. Having a detailed contract template may lower your monthly/annual rates. Insurers may request that you revise your contracts to cover certain provisions.
Insurers will consider you a high-risk company if your company has a history of lawsuits. It’s the same reason auto insurance agencies charge more for drivers with a history of at-fault collisions or traffic violations.
The location usually doesn’t pertain to tech companies, which tend to serve a global community with remote products like cloud, software, or data warehousing services. However, for other industries, rates are often higher in metropolitan areas with dense populations.
Facing an errors and omissions (E&O) claim can be a stressful experience for any technology business. However, understanding the claims process and how your omissions insurance coverage works can help you navigate this challenging situation with confidence.
Your technology E&O insurance policy is designed to protect your business from the financial and reputational risks associated with E&O claims. Here's how it can help:
By understanding the claims process and the benefits of your cyber liability insurance policy, you can effectively manage tech E&O insurance cost and claims and minimize their impact on your business.
It’s up to you how much omissions insurance cover you want—it depends on the average settlement amount and legal costs for your given industry. In the tech sector, small-to-medium-sized companies usually aim for $25,000 to $50,000 of coverage. For larger corporations, policies covering up to $1,000,000 per policy term aren’t uncommon.
The technology errors and omissions (E&O) insurance cost for your business will vary widely, depending on factors like the size of your company, the specific services you offer, and your past claims history. However, understanding the average costs and the breakdown of coverage can help you get a clearer picture of what to expect.
Type of Tech Company
Average Annual Premium
Software Developers
$1,000 - $5,000
IT Consultants
$750 - $3,000
Hardware Manufacturers
$1,500 - $7,500
Managed Service Providers (MSPs)
$2,000 - $10,000
These are just estimates, and your actual premium could be higher or lower. It's crucial to get multiple omissions insurance quote to find the best omissions insurance cover at the most competitive price.
Beyond the base premium, understanding what your omissions insurance covers is crucial. A typical technology E&O insurance policy includes various types of coverage:
Each of these components contributes to the overall liability insurance cost for your business. Understanding what's covered can help you choose an omissions insurance policy that best suits your specific needs and risk profile.
It also covers the following:
Remember, omissions insurance isn't just about protecting your finances; it's about safeguarding your reputation and ensuring the continuity of your business. By investing in the right coverage, you can focus on innovation and growth, knowing you're protected against the unexpected.
Securing the right technology errors and omissions (E&O) insurance is essential for protecting your tech business. But with so many options available, how can you ensure you're getting the best value for your investment? Here are some tips to help you secure the most comprehensive omissions insurance coverage at the most competitive price.
In addition to the factors mentioned previously, insurers will also assess several other aspects when determining your technology E&O insurance premium:
Don't settle for the first omissions insurance quote you receive. It's essential to get multiple quotes from different insurers to compare their offerings. Pay attention to the following:
By carefully considering these factors and comparing multiple omissions insurance quotes, you can confidently choose a technology E&O insurance policy that provides the best protection for your business at a competitive price. Remember, protecting your company with the right liability insurance is an investment in its future success.
Tech companies serve a diverse demographic. Each one requires coverage unique to its business model. There’s no such thing as a one-size-fits-all policy. That’s why Worth is dedicated to connecting tech agencies with a compatible E&O provider. Get a free quote today and view your rates.
To see how Worth can reduce your risk.