Understanding Policy Limits in E&O Insurance

Errors and omissions (E&O) insurance can be a vital safeguard for professionals who provide advice or services, protecting them from claims of negligence, mistakes or failure to deliver promised results. A key component of any E&O policy is the policy limit, which defines the maximum amount the insurer will pay for claims.

Errors and Omissions Insurance Policy Limits Explained

E&O policy limits are typically expressed in two parts: per-claim limit and aggregate limit. The per-claim limit represents the highest amount the insurer will cover for an individual claim, whereas the aggregate limit is the total coverage available for all claims made within the policy term—usually one year. For example, a $500,000/$1,000,000 policy means up to $500,000 is available for each claim, with a total of $1,000,000 available for all claims combined within the year.

Choosing the right policy limits depends on several factors, including the nature of your profession, the size of your business and the potential financial impact of a mistake. Professionals in high-risk fields, such as legal, medical or financial services, often require higher limits due to the greater potential for costly claims.

It’s also essential to understand how policy limits affect premiums. Higher limits generally mean higher premiums, but they also offer greater protection. Additionally, most E&O policies include deductibles, which are the amounts the insured must pay out-of-pocket before coverage kicks in.

Ultimately, understanding and selecting appropriate policy limits is crucial to verify that your E&O insurance offers adequate protection. Insufficient coverage can expose you to major financial risks, while excessive coverage might result in avoidable expenses. Working with an insurance broker can help you find the right balance tailored to your unique needs.

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For errors and omissions insurance near you, contact Hampton Insurance Services.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.