Insurance Curator Professional liability insurance (Errors & Omissions or E&O) protects professionals against allegations of negligence, missed advice, or faulty service. One of the most consequential choices when buying E&O in the USA is the policy trigger: claims-made or occurrence. This article helps businesses and practitioners in U.S. markets (including New York City, San Francisco Bay Area, and Chicago) decide which trigger is right for them by comparing coverage mechanics, cost implications, switching considerations, and practical buying guidance.
Quick summary: what the triggers mean
- Claims-made: Covers claims reported during the policy period, subject to the policy’s retroactive date. Common for consultants, tech firms, and many small-to-mid sized professional practices.
- Occurrence: Covers incidents that occurred during the policy period, regardless of when the claim is reported. Favored for long-tail exposures and buy-side acquirers.
How each trigger actually works (and why it matters)
Claims-made policies
- Coverage depends on two moments: when the act/omission occurred (after the retroactive date) and when the claim is made (during the policy period or extended reporting).
- Important elements: retroactive date, extended reporting period (tail), and nose/portfolio coverage if you switch carriers.
- Typical use: professional services with repeatable, shorter latency exposures (e.g., IT consultants, marketing agencies).
Occurrence policies
- A claim is covered if the alleged error or omission occurred while the policy was active, even if the claim is made years later.
- Preferred where claims can arise much later (e.g., architects, some engineering services, past investment advice).
Direct financial comparison: cost expectations in U.S. markets
Premiums vary by profession, limits, revenue, and jurisdiction. Typical ranges for a standard $1M per occurrence / $1M aggregate E&O policy:
- Small independent consultants (nationwide average): $400–$1,500/year (Insureon reports small-business E&O in roughly this band depending on industry and limits) — source: Insureon.
- Small tech/SaaS development shop (San Francisco, higher legal exposure): $2,000–$8,000+/year for claims-made $1M/$1M (enterprise risks push higher).
- NYC-based financial or legal-adjacent advisors: $1,200–$6,000/year, depending on revenue and client exposure.
- Mid-size professional firms purchasing occurrence coverage (rarer for small businesses): often 20–50% higher up-front than comparable claims-made initial-year premiums because carriers price for long-tail exposure.
Insurers and sample market signals:
- Hiscox and similar online carriers advertise small-business professional liability starting in the low hundreds per year for very low-risk consultants and solo practitioners (Hiscox’s small-business E&O pages show entry-level pricing and online quoting options) — source: Hiscox.
- National brokers/aggregators like Insureon publish ranges and explain the factors that drive premium differences — source above.
Note: large carriers (Chubb, CNA, Travelers) typically underwrite larger professional and tech E&O limits with minimums often in the multiple-thousands per year, especially in NYC and CA markets.
Claims-made vs Occurrence — detailed comparison
| Feature | Claims-Made | Occurrence |
|---|---|---|
| When covered | Claim must be made during the policy period (and act after retroactive date) | Incident must occur during policy period; claim timing irrelevant |
| Typical upfront cost | Lower initial cost for many professions | Higher initial premiums (carrier prices long-tail exposure) |
| Tail (extended reporting) | Required when policy is cancelled: buy tail to capture future claims | Not needed |
| Retroactive date risk | Critical — gaps create exposure | Not applicable |
| Switching carriers | Requires careful nose/tail planning | Simpler transition |
| Best for | Short-latency services, lower long-tail exposure | Long-latency exposures (architecture, environmental advising) |
| Examples of users | IT consultants, creative agencies | Architects, engineers, some medical device consultants |
When claims-made is usually best
- You operate a consulting business in New York City or Chicago that delivers advisory work with relatively short discovery periods.
- You want lower initial premiums and flexible options to scale cover later.
- You’re comfortable buying tail coverage when you stop the policy or move carriers (see What Is Tail Coverage?).
When occurrence is usually best
- You provide services with long latency for claims (plans, designs, or products that reveal failures after many years).
- You’re an acquirer or investor buying a business and need coverage for pre-closing incidents.
- You prefer the simplicity of no tail and no retroactive date negotiation.
Switching carriers, tails, and retroactive dates — practical issues
- Switching from claims-made to claims-made requires negotiating retroactive date continuity and normally buying tail coverage from the prior insurer or verifying nose coverage from the new insurer. See our guides on Retroactive Dates Explained for Professional Liability Insurance (Errors & Omissions) Policies and Claims-Made Professional Liability Insurance (Errors & Omissions): Pros, Cons and Buyer Pitfalls.
- Tail premiums often equal multiple years of the expiring premium (typical ranges: 100–300% of annual premium depending on carrier and risk). This is why many buyers rely on steady renewal rather than one-off tail buys.
- Lesson: if you’re in California or New York and expecting a sale or firm closure, build tail-cost contingencies into your exit planning.
Pricing examples by company and location (illustrative)
- Hiscox: online quotes for solo consultants often start around $300–$600/year for $1M/$1M limits if risk is low — Hiscox Professional Liability.
- Insureon aggregated marketplace: for many small-business E&O customers the reported range is $400–$3,000/year, with tech and finance professionals on the higher side — Insureon E&O cost guide.
- Market reality: in San Francisco for a small SaaS shop, expect $3,000–$10,000/year for robust claims-made E&O from admitted carriers; for a comparable occurrence policy the carrier may price 20–50% higher.
Practical checklist: how to decide (quick)
- Identify claim latency for your services (short vs long tail).
- Get 3 quotes for the same limits and deductible: one claims-made, one occurrence (if available), and one claims-made with quoted tail cost.
- Confirm retroactive date language and whether prior acts are covered.
- Ask each carrier about nose coverage and the cost of extended reporting periods.
- Model tail purchase cost into an exit-year scenario (e.g., sale or shutdown).
- Use this checklist in tandem with a formal procurement checklist: A Practical Checklist for Evaluating Claims-Made vs Occurrence Professional Liability Insurance (Errors & Omissions).
Final guidance for U.S. buyers (NYC, CA, Chicago)
- Small consultancies in NYC and Chicago commonly choose claims-made for cost-efficiency but maintain budget for tail when changing carriers or exiting.
- Firms in California (San Francisco Bay Area) with higher litigation risk should analyze occurrence pricing carefully or secure a long retroactive date and buy tail coverage.
- If you’re negotiating an acquisition or need pre-closing protection, occurrence policies or buyback/tail solutions are often required by counsel and acquirers.
Sources and further reading
- Insureon — Professional Liability coverage guide and cost ranges: https://www.insureon.com/professional-liability-insurance
- Hiscox — Professional Liability (E&O) product pages and sample pricing for small businesses: https://www.hiscox.com/small-business-insurance/professional-liability-insurance
- Consumer guidance on E&O and purchasing considerations: https://www.nerdwallet.com/article/small-business/professional-liability-insurance
For practical implementation, read about tail timing and options in What Is Tail Coverage? and learn to negotiate retroactive dates here: Retroactive Dates Explained for Professional Liability Insurance (Errors & Omissions) Policies. For a buyer-focused view on claims-made policies and common pitfalls, see Claims-Made Professional Liability Insurance (Errors & Omissions): Pros, Cons and Buyer Pitfalls.