How to Choose Limits for Professional Liability Insurance (Errors & Omissions): Per-Claim vs Aggregate

Choosing the right limits for Professional Liability Insurance (Errors & Omissions, or E&O) is one of the most important financial decisions for U.S. professional services firms. Limits define the maximum amount an insurer will pay for claims — and the structure (per-claim vs aggregate) determines how protection is exhausted over time. This guide explains the difference, gives practical selection frameworks for companies in key U.S. markets (New York, California, Texas, Florida, Illinois), and provides concrete pricing examples from major carriers to help you decide.

Table of Contents

Key terms (quick)

Per-claim limit: Maximum the insurer will pay for a single claim.
Aggregate limit: Maximum the insurer will pay for all claims during the policy period (usually 12 months).
Notation: "$1M/$2M" typically means $1,000,000 per claim / $2,000,000 aggregate.

Why limit structure matters (and who it affects most)

Multiple claims in one year: If you face several claims, an aggregate limit can be exhausted quickly even if each claim is within the per-claim cap.
Long-tail exposures: Some professional services (architects, engineers, healthcare consultants) face claims that trigger multiple suits or long-running defense costs — aggregate is critical.
Defense costs: Most E&O policies include defense within limits (not always outside the limits). If defense erodes the aggregate, you could lose indemnity dollars faster.

Per-claim vs Aggregate: Side-by-side

Feature	Per-Claim Limit (e.g., $1M)	Aggregate Limit (e.g., $1M or $2M)
Protects each claim up to limit	Yes — for each claim, up to per-claim cap	No — the aggregate is the annual maximum across all claims
Best for	Single big mistakes or rare large claims	Multiple smaller claims or serial suits in policy period
Typical small-business posture	$1M per claim common	$1M aggregate common; many prefer $2M aggregate if risk higher
Risk if low aggregate	Rapid exhaustion if multiple claims	Lower — higher aggregate protects multiple claims
Premium impact	Lower per same aggregate	Higher as aggregate increases coverage capacity

Practical guidance: How to choose limits (step-by-step)

Assess exposure by revenue and service
- Rule-of-thumb for many U.S. small firms: start at $1M per claim / $1M aggregate.
- Firms with higher revenue, greater client reliance, or regulated services often need $2M/$4M or more. Use your annual revenue and contract requirements as primary drivers.
Check contractual requirements
- Many clients (especially in New York City, Los Angeles, Chicago) require $1M/$2M or $2M/$4M minima. Always match the highest contract demand among your clients.
Factor in litigation climate and location
- States with higher litigation exposure like California and New York tend to drive higher premiums and higher recommended limits. Conversely, some parts of Texas or Florida may have slightly different claim frequencies.
Estimate defense burn rate
- If defense is inside the limit, simulate 1–2 years of defense cost for a typical claim (legal fees, expert witnesses). If defense alone would consume a meaningful portion of your limits, step up aggregate and/or per-claim limits.
Balance premium vs catastrophic protection
- Prioritize per-claim limits for catastrophic single-loss exposure; prioritize aggregate when multiple small/medium suits are plausible within one year.
Consider layered/excess policies
- Buy a primary layer (e.g., $1M/$1M) and buy excess layers (e.g., additional $4M aggregate). This is common for architecture/engineering and tech firms. See Layered Limits and Excess E&O: Advanced Structures for Professional Liability Insurance (Errors & Omissions).

Example scenarios and recommended limits

Independent consultant or solo CPA in Austin, TX (annual revenue $150k): $1M/$1M often adequate. Premium range: $400–$1,200/year depending on services and claims history.
Small SaaS firm in San Francisco, CA (revenue $2M): $1M/$2M minimum; many carry $2M/$4M. Premium range: $2,000–$8,000/year (varies by exposure and classifier).
Architecture or engineering firm in New York City (revenue $5M+): $2M/$4M or $5M/$5M recommended. Premiums frequently run $5,000–$30,000+/year depending on project risk and prior claims.

Real-world carrier pricing (U.S. market examples)

Pricing varies by state, revenue, claims history, and class code. The figures below are representative ranges drawn from insurer guidance and market broker data:

Hiscox (small business E&O)
- Known for low entry-level products for consultants and small firms.
- Typical starting premiums: around $400–$1,200/year for $1M/$1M for low-risk consultants (varies by state — e.g., Los Angeles vs Miami). Source: Hiscox Professional Liability pages.
- https://www.hiscox.com/small-business-insurance/professional-liability-insurance
Insureon (marketplace averages)
- Aggregates quotes across carriers; reports a wide range depending on profession:
- Average small business with E&O: $800–$2,500/year for $1M/$1M; high-risk classes much higher. Source: Insureon cost pages.
- https://www.insureon.com/professional-liability-insurance/cost
The Hartford / Chubb / Travelers
- Market-leading carriers for higher-limit placements and specific professions.
- Mid-to-high exposure accounts (software, A/E, legal-related advisory) frequently see $2,000–$25,000+/year for limits of $1M–$5M depending on revenue and risk. See carrier product pages for quotes.
- Example: The Hartford E&O overview: https://www.thehartford.com/business-insurance/errors-omissions

Note: These are representative ranges — obtain firm-specific quotes. In dense litigation markets like New York City or Los Angeles, expect the upper end of these ranges.

Cost-saving strategies without sacrificing protection

Increase deductible: Higher deductible reduces premium but increases your out-of-pocket per claim. See Choosing a Deductible Strategy for Professional Liability Insurance (Errors & Omissions) to Lower Costs Safely.
Layer coverage: Carry a lower-cost primary layer with an excess tower to achieve high aggregate protection more affordably. See Layered Limits and Excess E&O….
Loss control: Maintain contracts and documentation practices that reduce negligence exposure — insurers often offer premium credits.
Shop multiple markets: Use brokers or marketplaces (Insureon, Marsh, Aon) to compare options across admitted and surplus lines carriers.

How to justify higher limits to decision-makers

Show contractual requirements from major clients (e.g., $1M/$2M in a vendor agreement).
Run a scenario analysis: defense cost + indemnity for 1–2 claims vs. cost of higher limits.
Compare premium increase to potential loss: e.g., increasing from $1M/$1M ($1,200/year) to $1M/$2M ($1,800/year) vs. potential multi-claim exposure.

Closing checklist (for U.S. businesses)

Review client contract limits and standardize to the highest required.
Map services to exposure (consulting, tech, A/E, legal-adjacent).
Get quotes for at least three limit structures (e.g., $1M/$1M, $1M/$2M, $2M/$4M) from multiple carriers.
Consider excess layers if you need catastrophic protection while controlling premium.
Revisit annually or after revenue or service changes.