Errors and Omissions insurance (E&O) is another type of insurance that everyone in the freight and trucking industry should consider when hauling goods. But how much will this coverage cost you? What exactly does an E&O policy offer?
While cost is always a concern, the risk of not having this vital coverage is far greater than the cost of your premiums. Let’s look at what this coverage offers, how much it costs, and which factors affect the price of premiums.
What Is E&O Insurance?
Errors and omissions is a term that is often used instead of saying professional liability insurance. While these types of insurance have different names, they both do the same thing:
- Protect you in the event that a lawsuit alleges your mistake caused some type of damage
- Omission in service led to a loss
Many trucking companies and owner-operators assume that they don’t need E&O because it’s meant for “professionals.” However, you offer a service in a professional capacity and can reduce your business’s risks by obtaining an insurance policy that includes E&O.
Transportation and logistics companies need this insurance if they:
- Have employees that may make errors
- Fail to deliver time-sensitive goods on-time
- Make an error in judgment
- Gross negligence claims
- Breach of confidence
Freight forwarders, brokers and even warehouse workers can make errors that cause a costly lawsuit. E&O will help you absorb the costs of a lawsuit by paying for:
- Legal defense
- Other legal fees and costs
If you’re running your own trucking company, a single lawsuit is all it takes to derail your operations.
Business is filled with variables that are often outside of your control.
E&O will help you mitigate risks in business so that you can work on improving profits rather than scramble with uncertainty if you’re hit with a lawsuit.
Do I Need E&O Insurance If I Have General Liability Insurance?
Truckers and freight companies are not professional insurance providers. You may assume that you have general liability insurance and that is enough to cover you from potential lawsuits. The problem is that insurance companies often put in exclusions, which leave you open to risks if a lawsuit is filed against your business.
E&O insurance covers:
- Financial loss for a client
- Economic loss for a client
If you make a mistake or negligence is found, you will be held liable for these damages.
However, general liability insurance will not cover these circumstances because it only covers:
- Property damage claims
- Personal injury claims
In the ideal world, you’ll have both E&O and general liability insurance. The goal is to leave no gaps in your insurance coverage and obtaining both forms of coverage is a smart business decision.
You may find that your insurer offers packages when underwriting both policies.
Example Scenario Where an E&O Claim May Be Filed
A lot of truckers and freight companies skip E&O policies because they don’t understand that errors and omissions can occur when delivering any load. One example of a time when a claim may be filed against you includes:
- Truck breaks down
- Load isn’t delivered on time
If this scenario occurs, the client can file an E&O claim because you failed to meet contractual agreements. The goods may have needed to be delivered at a certain time, and if they weren’t, it could lead to potentially lost revenue for the client.
Additionally, if you hire truckers to drive for your operations, it’s possible that you didn’t vet them properly.
Perhaps the trucker’s license is invalid or has had several accidents on their record. In this case, the client may file a claim against you if something occurs during transport.
Claims can even be filed if you fail to file the right paperwork.
A simple lapse in judgment can cost you a lot of money and potential business. E&O covers these risks so that if a lawsuit is filed against you, the business doesn’t have to absorb large settlement and judgment amounts.
How Much Does E&O Insurance Cost?
Although E&O insurance offers valuable coverage and protection, cost is always a concern for business owners. You have a budget, and you need to stick to it.
The cost of an E&O policy can be quite high, but the cost of an employee’s mistake will almost always be higher than the premium.
On average, policies cost:
- $500-$1,000 per year, per employee
If your business has 20 employees, you can expect to spend between $10,000 and $20,000 for your coverage. Of course, your policy may be less or more expensive, depending on a number of factors.
Factors That Determine E&O Insurance Cost
If you get a quote from one insurer and then move or ask for a quote a year later, the cost can be dramatically different. Multiple factors will go into E&O premium estimates, including:
- Business size. The size of your operation will impact costs. Adding employees or trucks will increase your potential E&O risks. Smaller operations benefit from lower insurance costs because of their limited risk.
- Claims. A record of E&O claims will cause your premiums to swell. Insurers are in the business to make money, and if you have a long history of claims against you, you’re at a higher risk to insure and may even have a difficult time obtaining a policy.
- Limits. Lower limits mean less risk for the insurer and lower costs for you. The higher your coverage limit, the more you’ll pay for premiums.
- Location. Certain states have higher costs. If you operate in New York City, you can expect to pay higher premiums than if you were located in a small town in the south.
- Revenue. How much revenue does your operations bring in annually? Higher revenue makes you a target for lawsuits.
- Specialty. Industry and specialty will increase your risk and cost, too. For example, if you haul hazardous materials, your costs will be much higher than a freight company that hauls apples.
- Training. If you have employees, the insurer will want to learn about your employee training program. Training employees to improve safety and reduce risks will help you keep premiums low.
You’ll want to get quotes on your errors and omissions insurance to find an insurer that fits in your budget. If quotes are too high, you can inquire if the insurer will offer a lower price for multiple policies if you pay for the year or if there are any ways to bring costs down.
Errors and Omissions Insurance Quote
Errors and omissions insurance policy costs can vary drastically from one trucking company and state to another. If you want to maximize your coverage while reducing costs, request quotes from leading insurance providers.