A $1M Professional Liability (E&O) requirement means your policy should cover up to $1M per claim when a client says your test prep teaching or materials caused it a financial loss.
The short answer
- A $1M requirement means your Professional Liability (E&O) policy needs a $1M per claim limit for a client's financial loss tied to your test prep work. It usually comes from a school, district or employer contract.
- Check whether the clause asks for $1M per claim or also a $2M yearly total (the aggregate).
- Have the contract and your policy reviewed for gaps, such as score guarantee exclusions. Morrow can review them and help you find a $1M policy.
What does a $1M requirement mean for test prep companies?
Professional Liability (E&O, short for Errors and Omissions) covers claims that your teaching, materials or advice caused a client a financial loss. A sample clause in a district or school contract may look like this:
Illustrative contract wording
Vendor shall maintain Professional Liability (Errors and Omissions) insurance covering the test preparation and instructional services provided under this Agreement, with limits of not less than $1,000,000 per claim and $2,000,000 annual aggregate. If written on a claims-made basis, coverage shall be maintained for two (2) years after the Agreement ends.
Sample wording for illustration. Your contract's wording controls.
- Per claim: the most the policy pays for any one claim. Here, $1M.
- Aggregate: the most the policy pays for all claims in one policy year. Here, $2M.
- Matching the numbers: a $1M/$1M policy does not meet a clause that asks for a $2M aggregate. A $1M/$2M policy usually meets either wording.
- Claims-made: the policy covers claims made and reported while it is active, for work on or after the retroactive date (the earliest work date covered).
Who asks test prep companies for $1M?
Test prep companies that sell only to families may not be asked for a set limit. Institutions usually ask. Common sources:
- Public school districts running SAT, ACT or state exam prep programs.
- Private and charter schools bringing in outside instructors.
- Colleges and universities offering GRE, GMAT, LSAT or MCAT workshops.
- Employers paying for staff licensing or certification exam prep, who ask less consistently.
- Workforce boards and government training programs.
- Larger education companies that subcontract classes to you.
Bigger districts and government contracts sometimes ask for $2M per claim. That is higher than $1M/$2M, which keeps $1M per claim and adds a $2M yearly total (see $2M Professional Liability for test prep companies).
How is $1M built?
At $1M, the limit is usually one primary policy (the policy that pays first). Many test prep companies buy Miscellaneous Professional Liability (a general form for service businesses that give advice or instruction) or an education services form. If you mainly sell your own software, app or online course platform, Technology E&O may fit better (see Technology E&O vs Miscellaneous E&O). A policy review checks the contract against score guarantees, refunds, online classes and work with minors.
A commercial umbrella almost never covers Professional Liability. Adding a client as an additional insured (a party listed on your policy, usually only for liability arising from your services) is less standard on Professional Liability than on general liability, and availability and wording vary by policy. Many schools accept a certificate of insurance (a one-page proof of your coverage) when the contract does not require it. If you teach students under 18, Professional Liability usually excludes abuse claims. The contract may also ask for separate abuse and molestation coverage.
Good to know
Defense costs can use up the limit. Many Professional Liability policies pay defense costs inside the limit. See defense costs inside or outside the limit.
What will underwriters ask for?
An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. For test prep companies, they usually ask:
- Which exams you teach.
- How you deliver: in person, live online or recorded.
- Whether you offer score guarantees, refund promises or admissions advice.
- Your revenue by client type: families, schools, employers, government.
- How you hire and train instructors, including background checks.
- Prior claims, any open complaints, and your current policy and retroactive date.
What affects the cost?
- Exams you teach. Licensing exam prep may be priced differently from K to 12 tutoring.
- Promises in your marketing. Score guarantees can narrow terms.
- Claims history. Prior claims can raise price or limit options.
- Aggregate, retention and defense terms. $1M/$2M usually costs more than $1M/$1M. A higher retention (what you pay on each claim before the policy pays, like a deductible) usually lowers the premium.
Frequently asked questions
Do I need $1M Professional Liability as a test prep company?
Often yes, if a school, district, university or employer contract asks for it, and the contract wording decides the limit.
What kinds of claims could a test prep company face?
Claims usually allege a financial loss from your teaching or materials. Here are two hypothetical examples. A district says your program taught an old test format and wants its fees back plus a replacement vendor. Or an employer says outdated exam materials caused staff to fail and seeks retake fees. The policy may pay your defense if the claim is covered. Refunds of your own fees under a score guarantee are often excluded, so that depends on the policy wording.
I have a $1M/$1M policy and the district asks for $1M/$2M. What now?
Request new quotes for a $1M/$2M policy. Morrow can request them and ask that your retroactive date and prior acts coverage (coverage for past work done before the new policy starts) be kept where the market allows. Start the new policy by the contract date and keep the old one until then. Report anything that could become a claim to your current carrier before that policy ends.
Is $1M/$2M enough if my contract says $2M?
It depends on the wording: a clause that asks for $2M per claim is not met by a $1M/$2M policy, while a clause that asks for a $2M aggregate may be. A $3M limit usually needs a broker. Morrow can help you find it. See Professional Liability limits explained.
Looking for $1M in Professional Liability? Morrow can help.
Send us the contract's insurance requirement and your current policy, if you have one. Morrow can review them, check for gaps, and request quotes. Terms depend on underwriting.
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This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.