Insurance Curator Professional liability insurance (Errors & Omissions — E&O) protects service providers from claims of negligence, errors, omissions, or failure to perform. If you’re buying E&O for the first time in the United States — whether you’re a solo consultant in San Francisco, an architecture firm in Chicago, or a fintech startup in New York City — this guide walks you through each step with actionable advice, real-world pricing references, carrier comparisons, and next steps.
Why E&O matters for first-time buyers (U.S. focus)
- Protects your revenue and reputation if a client sues for services that caused financial loss.
- Often required in contracts with clients, especially in professional services, tech, finance, and consulting.
- Differs by state and profession — exposure and regulatory expectations vary between California, New York, Texas, Florida, and Illinois.
Industry data shows typical small-business E&O premiums range broadly; most small firms pay between $500 and $3,000 per year, depending on profession, limits, and claims history (Insureon). Larger risks or certain professions (architects, engineers, large IT firms) can cost substantially more. [Insureon; The Hartford]
Sources:
- Insureon: https://www.insureon.com/professional-liability-insurance/cost
- The Hartford: https://www.thehartford.com/business-insurance/professional-liability-insurance
Quick glossary (must-know terms)
- Claims-made vs. occurrence: Most E&O is claims-made — coverage depends on policy in force when a claim is filed.
- Retroactive date: The date from which incidents are covered under a claims-made policy.
- Limits: Expressed as “$1M/$1M” (per-claim / aggregate).
- Retention / deductible: Your out-of-pocket for a claim before the carrier pays.
Step 1 — Assess your actual exposures
Start by cataloging:
- Services offered (e.g., accounting, software development, design)
- Annual revenue and contract size
- Typical client types and jurisdictions (NYC vs. Silicon Valley vs. Miami)
- Past or pending claims
This shapes recommended limits and endorsements.
Step 2 — Decide coverage limits and retention
Common starting points:
- Solo consultants/freelancers: $1M per claim / $1M aggregate
- Small firms (5–20 employees): $2M/ $4M or higher
- High-risk professions (engineers, architects): $5M+
Higher limits lead to higher premiums. As a rule of thumb, U.S. small firms often see:
- $1M/$1M: $500–$3,000/year
- $2M/$4M: $1,000–$6,000/year
Ranges vary by state and profession (Insureon, The Hartford).
Step 3 — Decide whether to use a broker or buy direct
- Use a broker when you need carrier access, tailored terms, or negotiation help (recommended for firms with >$500k revenue or specialized exposure).
- Buy direct from online carriers when you want speed and standard forms (suitable for solo practitioners).
See guidance on selecting brokers in our related piece: How to Choose a Broker for Professional Liability Insurance (Errors & Omissions): Questions to Ask.
Step 4 — Prepare an RFP & collect comparable proposals
What to include in an RFP:
- Detailed revenue and service descriptions
- Claims history
- Desired limits and deductible
- Contractual requirements (indemnity, waiver of subrogation)
Use an RFP checklist to speed quotes: RFP Template Items to Include When Seeking Professional Liability Insurance (Errors & Omissions) Quotes.
Step 5 — Compare proposals (coverage, not just price)
Key items to compare:
- Policy form (claims-made wording and retro date)
- Definitions of professional services
- Exclusions (contractual liability, prior acts)
- Defense outside the limits vs. inside limits
- Supplementary payments, consent to settle, joint/several liability language
Use a spreadsheet approach to compare proposals: How to Compare Professional Liability Insurance (Errors & Omissions) Proposals: A Practical Spreadsheet Guide.
Carrier & market snapshot (U.S. examples)
Below is a practical comparison of several carriers and market options commonly used by first-time E&O buyers in the U.S. Pricing is illustrative of advertised starting points and market averages — obtain quotes for exact pricing.
| Carrier / Channel | Typical entry point (advertised or market) | Best for | Notes / Source |
|---|---|---|---|
| Next Insurance | Starting around $29/month for some professions ($348/yr) | Solo consultants, fast online quotes | Transparent online buying experience; quick bind (https://www.nextinsurance.com/professional-liability-insurance/) |
| Hiscox | Ads show professional liability plans starting low monthly (state-dependent) | Small professional firms, nationwide | Online and agent distribution; competitive for solo practitioners (https://www.hiscox.com/small-business-insurance/professional-liability-insurance) |
| The Hartford | Typical small-business premiums often $500–$2,000+ /yr depending on class | Broad small-business market, established claims handling | Strong brand for business lines; can be higher for specialized risks (https://www.thehartford.com/business-insurance/professional-liability-insurance) |
| Chubb / CNA / Travelers | Often mid-to-upper market pricing, tailored for larger or higher-risk firms | Larger professional firms, A+ carriers | Preferred for big accounts and complex risk portfolios |
Note: exact premiums depend on state (e.g., California vs. Texas), revenue, and scope of services. Always request quotes.
Step 6 — Evaluate claims handling & carrier reputation
A policy is only as good as the claims team. Check:
- AM Best ratings and financial strength
- Public claims practices and timing
- Industry references for the carrier’s claims service
For guidance on checking carriers, read: How to Evaluate Claims Service and Reputation for Professional Liability Insurance (Errors & Omissions) Providers.
Step 7 — Negotiate endorsements and price
Negotiation levers:
- Offer loss control steps (QA processes, client contracts with clear scopes)
- Increase retention to lower premium (if you have cash reserves)
- Bundle with other lines (GL, cyber) to secure a credit — see: How to Use a Broker to Bundle Professional Liability Insurance (Errors & Omissions) With Other Lines for Better Pricing.
Step 8 — Bind the policy and manage lifecycle
- Confirm retroactive date, policy period, and required endorsements in writing.
- Save policy declarations, endorsements, and the full policy wordings.
- Prepare for renewals: track claims, revenue changes, contract obligations.
See lifecycle best practices: Lifecycle Management: Renewals, Audits and Policy Changes for Professional Liability Insurance (Errors & Omissions) Programs.
Practical checklist for first-time buyers (U.S. firms)
- Inventory services, contracts, clients, and revenues by state (NY, CA, TX, FL, IL).
- Choose target limits (start $1M/$1M for solos).
- Collect 3+ quotes (mix direct and broker).
- Compare policy forms (not just price).
- Verify carrier claims reputation and financial ratings.
- Negotiate endorsements, retro dates, and bundling credits.
- Bind policy, store documents, and schedule annual review.
Final notes and next steps
Start with a realistic budget: most U.S. small professional firms can expect $500–$3,000/year for standard $1M/$1M coverage, with online carriers like Next Insurance and Hiscox often showing lower advertised starting rates for qualifying professions and states. For specialized or high-exposure practices, plan for higher limits and specialized carriers (Chubb, CNA, etc.). Get tailored quotes for your specific location (e.g., San Francisco vs. New York City) and services.
External resources cited:
- Insureon cost guide: https://www.insureon.com/professional-liability-insurance/cost
- The Hartford: https://www.thehartford.com/business-insurance/professional-liability-insurance
- Hiscox professional liability page: https://www.hiscox.com/small-business-insurance/professional-liability-insurance
- Next Insurance professional liability: https://www.nextinsurance.com/professional-liability-insurance/