Professional liability insurance, also known as errors and omissions insurance (E&O), protects your small business from the financial risks of professional mistakes. Any business that provides professional services or offers advice, like consultants, should consider this coverage. Your industry and the scope of your services affect the cost of this policy.
Regardless of insurance policy limits, the median cost of professional liability insurance for a small business is $59 per month ($708 annually). The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of business insurance because it excludes outlier high and low premiums.
Most small business owners (51%) pay between $500 and $1,000 per year for their policies, and 18% pay less than $500. These figures were derived from an analysis of thousands of insurance policies purchased by Insureon small business customers.
Your type of business and the industry you work in have a significant impact on the cost of professional liability insurance, since different professionals are exposed to different liabilities. On average, higher risk industries pay higher premiums, while low-risk industries enjoy lower rates.
A building design business, for example, usually pays higher premiums than an accounting business because a construction mistake could lead to bodily injury as well as financial loss. Those working in media and advertising also pay high premiums, since an advertising agency's work directly impacts a client’s bottom line.
If you want a professional liability insurance policy that pays out more per incident or per year, you’ll need to increase your amount of coverage – which means you’ll pay a higher premium to your insurance company.
The limits on professional liability policies vary significantly, from $250,000 to $2 million. Most Insureon customers (61%) purchase a $1 million / $1 million professional liability policy. This includes:
Pay your entire premium upfront. You can choose to pay your insurance premiums once a month or once a year. While making a smaller payment each month requires less money up front, it may cost more in the long run since insurers often offer discounts to businesses that pay an annual premium.
Keep continuous coverage. While it’s possible to purchase professional liability coverage when you start a project and drop coverage when you complete the project, this cost-cutting strategy can backfire. To collect insurance benefits, your “claims-made” professional liability policy must be active:
Continuous coverage is key if you don't want to pay out of pocket for professional liability lawsuits. Learn more about claims-made insurance coverage.
Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific policy.