Finding The Optimal Error And Insurance Omission Rates

The primary function of E & O coverage is to provide a shield of economic protection against legal defense costs and the payment of third-party damage claims that are not included in traditional liability policies. If, for instance, an accountant inadvertently erases massive quantities of valuable proprietary data that belonged to a client, professional errors and omissions insurance covers any resulting court judgment or non-judicial financial settlement. Error and Omissions Insurance rates

Whereas, general liability insurance will cover any damage award that results from a whiplash injury sustained by the same client that results from a slip-and-fall accident that occurs while visiting the accountant’s office. Litigation may be commenced for a variety of reasons. Substantial attorney’s fees must be paid regardless of the ultimate outcome of the case. Even frivolous, malicious, or groundless lawsuits can cost your company tens of thousands of dollars in legal defense before its final dismissal or defeat. The extremely broad array of professional and industry-specific factors that impact the incidence and outcome of adverse litigation is why errors and omissions insurance rates are so variable.

Following are the primary business and professional characteristics that determine the range of error and omissions insurance rates you are likely to be offered:

- The nature of professional services provided
- Geographical area(s) of practice
- Gross annual income
- Number of practitioners who actively dispense
         services
- History of prior claims or adverse litigation

Once the prospective E & O carrier has compiled and analyzed all these factors, a premium is quoted. Hardly ever do two practitioners of the same profession present identical profiles in all of these categories. Thus, each E & O insurance rate is custom-tailored to apply only to the specific business or professional that the coverage is intended for. Potential costs for legal fees are the major benefit of all errors and omissions insurance policies. Thus, premiums depend heavily upon the relative likelihood of lawsuits by aggrieved clients or customers.

Optimal error and omission insurance premium rates are usually obtained only after an exhaustive comparison shopping campaign. Thus, it pays to make inquiries even if a practitioner has existing coverage. Relatively few agencies and carriers are specialists in the E & O insurance market sub segment. Locating such highly specialized coverage providers is well worthwhile, however. The in-depth knowledge and specialized insurance expertise of these professionals yields insights of much greater value to prospective insureds. In the long run, this results in substantial savings from a fuller comprehensive of realistic coverage needs and their respective costs. Quite often, this tremendous advantage even offsets the typical “multi-coverage” discounts offered by traditional carriers for maintaining several policy types with a single insurer. In summary, the time and effort invested in fashioning the ideal combination of coverage and premium levels pays many long-term dividends.