What is Professional Liability Insurance?
Professional Liability protects your business against claims of negligence, misrepresentation or mistake, as well as document or paperwork errors. Claims made against a Professional Liability policy typically result from clients who allege that your services, products, or employees have caused them to suffer some sort of financial damage. Professional Liability insurance may also be sold as Errors and Omissions (E&O) insurance or medical malpractice insurance, depending on the industry that specific policies are designed to protect.
People working in certain industries may be required to have Professional Liability insurance in order to do business.
This includes many different types of professions, such as:
And many more
How much is Professional Liability insurance?
BizInsure analyzed more than 5,000 of our customers and found that on average small businesses spend around $767 per year for Professional Liability insurance. This includes all industries and varying policy limits. However, Professional Liability insurance costs less than $600 per year for more than a third of small business owners.
Our analysis also found that just over half of small business owners pay less than $51 a month for their Professional Liability coverage.
To learn more about how much Professional Liability insurance costs, click here.
There are many factors that insurance companies use to determine the cost of Professional Liability policies. These include:
- Your industry
- The amount of revenue your business produces
- The risk management procedures you have in place
- Claims history
- The amount of coverage desired
Every small business is different. The unique risk factors your business faces mean that your policy and premiums may differ from other companies, even those within the same industry.
What does Professional Liability insurance cover?
Professional Liability insurance can protect your business against allegations that your services, products or employees caused a third party some form of financial damage. This includes:
Errors, mistakes and omissions
Even the most careful professional service provider can sometimes make a mistake or forget to rely important information to a client.
Professional service providers are held to high standards, and if you don’t meet a client’s expectations, you could face a lawsuit.
Breach of contract
If you do not meet your contractual obligations, your client may sue.
Inability to deliver the services you promised could lead to a claim or lawsuit from an unsatisfied client.
Even if you’re on schedule, unforeseen events can impact agreed deadlines and trigger a claim.
A Professional Liability policy typically pays for your attorney fees and other legal expenses necessary to defend your business in court. It also covers any settlements or judgements you are required to pay as a result of the claim.
The coverage provided by a Professional Liability insurance policy applies even if you are not at fault. Defending your professional reputation can be expensive, even if the claim made against you is baseless. Professional Liability insurance provides an important financial safety net for both legitimate and meritless liability claims.
Professional Liability insurance covers incidents such as:
- Providing incorrect advice to a client around accessibility or other building standards
- Flaws in your work that require the client to pay for new materials and labor
- Alleged mistakes, even if you are not at fault
Explained: What does Professional Liability Cover?
What is not covered by Professional Liability insurance?
There are limits to what Professional Liability insurance will cover. Professional Liability policies do not cover:
Third-party bodily injury or property damage:
A General Liability policy provides protection should a customer or other member of the public is injured on your business premises or you damage someone else’s property.
Work-related injuries or illnesses
A Worker’s Compensation policy can help you or your employees get back to work following a workplace injury or illness.
Who needs Professional Liability Insurance?
There are many types of small businesses and occupations who could need Professional Liability insurance. This includes businesses that:
- Regularly give advice to clients
- Provide professional services directly to customers
- Represent their clients’ interest on their behalf
In many states, minimum amounts of Professional Liability coverage are required for some occupations, such as medical professionals and attorneys. Additionally, professional associations and some clients may also require you to carry this type of policy.
To learn more about the Professional Liability requirements in your area, consult your state or local laws or professional association.
These guidelines can apply to a number of different professions in very different industries. Examples include:
Whether you’re designing the newest skyscraper or a family home, you may need protection while you work. A small error, misunderstanding with the contractor, and other forms of professional wrongdoing can leave architects open to an expensive lawsuit. Professional Liability insurance could help shield you against common risks you may face. Visit our Architect Liability Insurance page to learn more.
Your work is essential to the planning and construction of buildings and other parts of the country’s infrastructure. Engineers work closely with architects, contractors, and other professionals on each project. A missed deadline, mistake, and other unintentional mishaps could leave you vulnerable to a lawsuit. Visit our Insurance for Engineers page to explore your coverage options.
Business owners and professionals rely on your expertise and advice to help them improve their company. A simple mistake, missed deadline, or breach of contract could lead to a costly lawsuit that threatens a consultant’s finances and professional reputation. Professional Liability insurance could help you protect your consultancy. Visit our Insurance for Consultants page to learn more.
Working closely with patients and their families can be rewarding. It can also leave healthcare providers at risk for expensive lawsuits. Shield yourself against claims of negligence, mistakes, and other types of professional wrongdoing with Professional Liability insurance coverage. Visit our Insurance for Home Care Providers, Businesses and Agencies page to explore options for protecting your small business.
Your clients trust you with their money. A small mistake could lead to huge losses for them—and even bigger problems for you. Professional Liability insurance helps protect accountants against expensive lawsuits resulting from errors and other faults in their work. Visit our Insurance for Accountants page to learn more about protecting your small business.
You need insurance but don’t know what kind? BizInsure offers General Liability Insurance, Professional Liability Insurance, also known as Errors & Omissions insurance (E&O), Workers Compensation Insurance, and Business Owner’s Policy, so you have plenty of options. Compare quotes and find out which policy is right for your company with BizInsure.
Professional Liability Insurance FAQs
Is employers’ liability the same as Professional Liability insurance?
No, employers’ liability is not the same as Professional Liability insurance.
Employers’ liability protects businesses against workplace injury or illness claims not covered by Workers’ Compensation insurance. It may be included as part of your Workers’ Compensation policy (except for policies purchased from a monopolistic state fund) or added to your policy as an endorsement.
Employer’s liability typically covers:
- Lawsuits by third parties distantly involved in the accident
- Lawsuits brought by the family of an employee who is deceased or disabled
- Non-employees who suffer physical damage due to the employee’s injury
- Dual-capacity lawsuits where you are sued both as the employer and as something else (i.e., a product manufacturer, service provider, landlord, etc.)
Is malpractice insurance the same as Professional Liability insurance?
Malpractice insurance is a type of Professional Liability insurance designed specifically for people working in the medical field. The potential for mistake is higher for these occupations and the consequences that follow them could be much greater for their patients.
Examples of occupations that may consider malpractice insurance include:
- Nurse practitioners
- Massage therapists
What is General Liability and Professional Liability insurance?
General Liability is a common form of insurance coverage that many small businesses consider. It differs from Professional Liability insurance in that it covers bodily injury and property damage claims made by third parties.
You might consider General Liability insurance if you:
- Regularly meet with third parties (clients, vendors, delivery people, etc.) in your office or workplace
- Regularly meet with clients or vendors in their homes or places of business, or on third-party worksites
- Handle your client’s property or personal belongings
- Have employees who do any of the above
Click here to learn more about General Liability insurance.
What is the difference between E&O and Professional Liability insurance?
Professional Liability insurance is the same as Errors and Omissions (E&O) insurance. They provide the same forms of protection against mistakes in your work, negligence, breaches of contract, and other common liabilities in this category.
You may be more likely to see a policy listed as E&O insurance when it is being sold to certain industries, such as real estate, tech, and accounting.
Is directors and officers’ insurance the same as Professional Liability?
Directors and officers’ insurance is a type of Professional Liability insurance designed specifically for the higher ups at a company. This includes directors, officers, executives, and other members of upper management.
While directors and officers’ insurance is similar to Professional Liability insurance, the coverage it provides is targeted to the unique risks faced by a company’s primary decision makers. This includes:
- Poor financial management
- Wrongful acts and conflicts of interest (excluding crimes or illegal acts)
Like Professional Liability, directors and officers’ insurance protects against claims that typically come from outside the company, such as from a dissatisfied client or investor.
Is employment practices liability the same as Professional Liability insurance?
No, employment practices liability is not the same as Professional Liability insurance.
Employment practices liability protects businesses against claims and lawsuits brought by employees who allege that the company has violated their legal rights. Common reasons for an employment practices lawsuit include:
- Wrongful termination
- Failure to promote or hire
- Sexual and other forms of harassment
Is Professional Liability insurance tax deductible?
Yes, Professional Liability insurance is typically a tax-deductible expense for small businesses. According to the IRS, you can deduct many insurance premiums that are considered ordinary and necessary costs. This includes Professional Liability, General Liability, and Workers’ Compensation insurance, as well as many of the coverages that can be included in a Business Owner’s Policy (BOP).
A tax professional can help you determine which insurance premiums you can deduct from your tax filing.