$3M Professional Liability (E&O) Insurance for Test Prep Companies

For test prep companies whose client requires $3M: one $3M Professional Liability policy, or a smaller primary plus follow-form excess, can usually meet it.

What does a $3M requirement mean for test prep companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your instruction, materials or advice caused a client a financial loss. A $3M clause may read like this:

• Per claim and aggregate: the most paid for one claim, and for all claims in a policy year. Both are $3M.
• Primary plus excess: this clause allows stacked policies. If yours is silent, confirm with the client that primary plus follow-form excess meets it.
• Claims-made: Professional Liability is almost always claims-made. It covers claims made while the policy is active, for work done on or after the retroactive date (the earliest date of work the policy covers).

Who asks test prep companies for $3M?

Many test prep companies are asked for $1M or $2M. A $3M request is one step higher than $2M and usually means the client is large, or the program is tied to public money or careers.

• Large districts running SAT, ACT or state exam prep across many schools.
• State university systems buying GRE, GMAT, LSAT or MCAT prep.
• State agencies and workforce boards funding licensing exam prep.
• Hospital systems and large employers paying for staff licensing exam prep.
• Large education companies that subcontract courses to you.

How is $3M built?

A primary policy pays first. An excess layer pays only after the primary limit is used up. "$1M xs $2M" means a $1M layer above the first $2M.

Option 2 could also be a $2M primary with a $1M excess layer. The excess should follow form, meaning it uses the same terms as the primary and simply adds more limit. Layers usually need the same retroactive date and policy period. A commercial umbrella almost never counts, because umbrellas usually exclude professional services.

Test prep companies often buy Miscellaneous Professional Liability, a general form for service businesses that do not fit a specific profession. If you mainly sell your own app or online platform, Technology E&O may fit better (see Technology E&O vs Miscellaneous E&O). If you teach students under 18, the contract may also ask for separate abuse and molestation coverage, which Professional Liability usually does not include.

Already have a policy? Morrow can request new quotes for a $3M primary or for excess layers, and ask carriers to keep your retroactive date where the market allows.

What will underwriters ask for?

An underwriter decides whether to offer coverage, and on what terms. Expect questions on:

• Which exams you teach, and what share is professional licensing prep.
• How you deliver: in schools, live online, recorded courses, or your own platform.
• Score guarantees, refund promises and admissions advice.
• How fast you update materials when a test changes.
• Revenue by client type and the contract requiring $3M.
• Instructor background checks, three to five years of loss runs (a report of past claims), and your current policy.

What affects the cost?

• Exam type. Licensing exam prep, where a failed exam can delay a career, may be priced differently from K to 12 prep.
• Contract size and client type. Larger contracts mean larger possible losses.
• Marketing promises. Score guarantees and outcome claims can narrow terms or add cost.
• Structure. The primary layer may cost more per $1M than excess, though pricing varies by carrier and structure, so it helps to quote both setups.
• Claims history, retention and defense terms. Retention is like a deductible, and a higher one may lower premium.

Frequently asked questions

Do I need $3M Professional Liability as a test prep company?

Only if your contract or client requires it, and large district, university and government contracts often do. Hypothetically, a state workforce program could say an outdated outline left many trainees failing, costing it grant funding. Refunds and the cost to redo your services are commonly excluded, so the covered part may be smaller than the demand.

Does a $1M primary plus $2M excess meet a $3M contract requirement?

Often, yes, if the excess follows form and the contract allows stacked policies. Confirm with the client in writing before you buy.

Can a school district be added as an additional insured on my test prep Professional Liability?

Usually not. An additional insured is someone else covered by your policy, and Professional Liability is written for your own errors. A few carriers may cover a client for liability from your work, but most do not, so check the contract. Many clients accept a certificate of insurance (proof of coverage) that lists every layer.

How long does it take to get $3M in Professional Liability?

It varies. Timing depends on the carrier, the size of the limit and how complete your application is. Excess layers can add time.

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.