Errors & Omissions

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If you are into the service industry, you might always run the risk of being sued by customers in case they incur losses due to your products or services.

Errors and omission insurance policy, also called professional liability insurance, offers protection to companies and their subsidiaries for such claims which are brought against them by their customers in respect of negligence, errors, etc. The policy plays a crucial role by paying for defence costs and includes that amount as well which an insured would have to pay as compensation to the third-party.

If we talk about how much errors and omissions insurance cost, it would be slightly difficult to find the cost of it. However, if we try to find the answer, then we can say: ‘it depends’. The cost of errors and omissions insurance policy would depend on a wide range of factors like business size, day-to-day operations, etc.

Every errors and omissions insurance policy has two different limits=

  • Occurrence Limit= It is the maximum amount which a professional liability insurance company would pay for one claim made during the tenure of the policy.
  • Aggregate Limit= It is the maximum amount which an errors and omissions insurance company would pay in claims in the lifetime of the policy.

Your errors and omissions insurance cost would also depend on the number of your employees along with your revenue. Some small-business owners prefer to choose the limit on the basis of their likely exposure, while others may choose a cover with higher limits as it may be required in contracts.

The other factor that drives the cost of errors and omissions insurance is the type of industry. The riskier your business is, the higher your errors and omissions insurance policy premium would be. It means architects and engineers would have to pay a lot more for errors and omissions insurance policy than business consultants. It is because, if an architecture makes a mistake, the building will collapse and people might die. However, if a marketing consultant makes a mistake, it’s likely that losses would not involve human life. In any case, if the professional mistake is high, the professional liability insurance cost would also be high.

Read more: What are the different types of liability insurance?

Similarly, if you have been sued in the past, you might have to pay a high cost for the insurance. The insurer would also look into whether you have dealt with prior mistakes or not and can increase the cost accordingly.

Then, there is a deductible in the insurance policy which is also considered by errors & omissions insurance company. In the insurance field, the deductible is the amount that a policyholder is required to pay before the insurer settles the remaining claim amount. Further, the higher the deductible, the lower would be the premium or the cost of errors and omissions insurance policy.


K.S Creatives enjoy a long list of clients which includes some leading names in the engineering field as well. Last year, the company decided to buy errors and omissions insurance policy, and for that, it started computing the cost which it had to pay to the insurance company. Considering the intricacies involved in the corporate insurance world, K.S Creatives took the help of corporate insurance advisor who suggested a particular insurance company. Here, the insurer considered various factors to find out the cost which K.S Creatives would require paying as premium.

The insurer looked into the business of K.S Creatives which was related to apparels, and in which the risk was also low. Further, the company also looked into the number of employees along with the claim history, if any.

Read more: What is limits of insurance in Commercial Liability Insurance?

From the last five years, K.S Creatives is in the apparel business and has a long list of clients in overseas as well. The insurer considered this fact, including revenue as well, while deciding the errors and omissions insurance policy cost.

The policy had a deductible clause as well. It means, at the time of loss, K.S Creatives would have to pay a certain portion of the claim as the remaining would be settled by the insurer. K.S Creatives opted for a high deductible amount to trim the cost of errors and omissions insurance policy cost.