Professional liability insurance

Professional liability insurance is designed for businesses that make a living off their expertise.

Even the most experienced and thorough professional service provider makes mistakes. Unfortunately, clients may not be so understanding if your error costs them considerable time or revenue.

Professional liability insurance, a type of contingent liability insurance, helps protect you from lawsuits filed by unsatisfied clients.

When a dissatisfied client sues over a mistake made by your business, professional liability insurance can help cover the cost of legal defense, including the cost of hiring a lawyer.

Specifically, professional liability insurance will help provide coverage for claims related to:

Professional liability insurance, also called professional indemnity insurance, benefits a variety of industries that provide services directly to clients or customers, and some types of businesses are required to carry this coverage. It's designed for both businesses and independent contractors that make a living off of their expertise.

A few specific professions need professional liability coverage more often than others, including:

Tech professional liability coverage for IT and technology professionals is more commonly referred to as tech errors and omissions insurance, or tech E&O.

This policy provides coverage for lawsuits related to work mistakes, oversights, and negligence. For instance, if an error by your business causes a client’s server to crash, this coverage would help with your defense costs.

Tech E&O typically bundles errors and omissions coverage with third-party cyber insurance, which provides coverage for your business's legal expenses if a client files a lawsuit after experiencing a data breach.

Professional liability coverage provides support for a variety of different professional services that offer their expertise and knowledge as a service.

Examples include notaries and travel agents. Professional liability insurance can help protect sole proprietors and other small business owners from claims of poor advice, claims of negligence, and other forms of misrepresentation and mistakes.

Professional liability insurance for consultants offers financial compensation for lawsuits alleging ineffective advice or inaccurate projections.

For example, a management consultant promises a company that it will improve its profits by 20% by a certain date. When the date arrives, profits have gone up, but not as much as projected. Professional liability insurance would help cover the consultant’s legal defense costs if the client sues the consultant over its financial troubles.

Some clients may ask for proof of professional liability insurance before they agree to work with a consultant.

Professional liability insurance for healthcare providers offers the protection your healthcare business needs to continue providing its services while handling a lawsuit. In this industry, it's called medical malpractice insurance.

For instance, if a patient claims that neglect from a nurse caused bed sores, they could file a lawsuit against them. Professional liability insurance would cover legal expenses for the nurse, such as the cost of hiring an attorney.

Some states require malpractice insurance for doctors and other medical staff. More often, the facility where you work will require you to carry a certain amount of this coverage.

Professional liability insurance for accountants and CPAs covers the costs of lawsuits based on accounting errors, data entry errors, miscalculations, or lost documentation.

For example, if an accountant incorrectly enters a client's financial transactions into a spreadsheet and the budget falls short, the client may trace the mistake back and file a lawsuit. Professional liability insurance would cover the accountant's cost of hiring a lawyer.

Because the policy offers indirect financial protection for the client, some clients will require proof of insurance before they agree to work with your firm.

Professional liability insurance for architects and engineers offers financial protection against a wide range of lawsuits, such as disputes over building design, cost overruns, mistakes, and missed deadlines.

Someone could sue you for a missed deadline, even if it’s not your fault. If the materials you need to complete a project aren’t delivered on time, you may face a customer lawsuit.

Architects and engineers may need this coverage to obtain a license from state regulators and to qualify for contracts.

Complete our easy online insurance application to get free quotes. Insureon's expert insurance agents can help you find affordable professional liability coverage that meets the needs of your small business.

You’ll typically be able to get coverage quickly and receive a copy of your professional liability insurance certificate on the same day.

While professional liability insurance covers many costs related to legal action from a client, it does have a number of exclusions. For example, it only covers the cost of defending against lawsuits – it doesn't pay for lawsuits you initiate.

Unless your policy has prior acts coverage, it will only cover claims filed while the policy is active and for incidents that occurred after you bought the policy. In this case, endorsements can fill gaps in your professional liability coverage.

Other exclusions from professional liability insurance coverage include:

There are typically a couple different scenarios when a business may be required to have professional liability insurance coverage.

Clients may request a certificate of insurance as proof that you have coverage in order to secure a contract. This way, they know that in the event that you make a costly mistake or don't meet their standards, they will be able to recoup their losses.

Additionally, if you decide to apply for certain professional licenses, many states will require that you hold professional liability insurance before you can submit your application.

Having a certificate of insurance makes it easier to establish trust in your business. As a policyholder, you can then show licensing boards, clients, and others that if you make a mistake in your professional work, you’re able to pay for any negative outcomes.

Professional liability insurance will help provide indemnity for legal costs in the event that a client files a lawsuit against you over an accusation that you failed to meet expectations.

To make a professional liability claim, you can call your insurance provider. They will then ask you to provide some basic information, such as a description of the incident and your policy number.

Most professional liability insurance policies are written on a claims-made basis. This means that in order to collect your insurance benefits, your professional liability policy must be active:

• When an alleged mistake occurs, and
• When the claim is filed

If you want coverage for work you've done in the past, you can ask your insurer to set a retroactive date for your policy. Continuous coverage is key if you don't want to pay out of pocket for lawsuits.

The short answer is no. Different industries use different terms for the same type of coverage. You will sometimes see professional liability insurance called errors and omissions insurance (E&O), even though the policies are identical except for the name.

The term E&O insurance is used most often for insurance agents, real estate agents, tax preparers, and IT professionals.

Lawyers and doctors refer to this policy as legal malpractice or medical malpractice insurance, respectively.

General liability and professional liability insurance both protect against common small business liability claims, but they cover different types of lawsuits.

General liability insurance covers customer bodily injuries, customer property damage, and advertising injuries. In contrast, professional liability insurance covers any legal defense costs when a client or customer suffers a financial loss due to your professional services or advice.

If you want to learn more about this policy, you can find additional answers in our frequently asked questions about professional liability insurance.

If there are any additional questions you have about coverage or building a risk management plan, you can also contact an Insureon agent.