Professional Liability Insurance
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Frequently asked questions about professional liability insurance

Professional liability insurance covers the costs of legal disputes over professional mistakes. Learn more about coverage, costs, and other considerations

Professional liability insurance coverage

Which businesses need professional liability insurance?

Businesses that offer a professional service or give advice to clients need professional liability insurance (also known as errors and omissions insurance). It’s the only business insurance that protects against dissatisfied clients who file a lawsuit over a mistake, missed deadline, or another complaint related to the quality of your work.

While state laws don’t always require businesses to carry professional liability insurance, some professionals may need this coverage in order to obtain a license in their state. Business owners might also need this policy for government or client contracts, or to work in a legal or medical setting.

The circumstances that lead to potential professional liability claims are common in some industries:

  • If a client has unmet expectations based on a miscommunication or an error in a contract, email, or order form, they may sue.
  • If you give erroneous instructions or advice that causes financial losses a client may blame you and sue for damages.
  • If your work is late, incomplete, or fails to meet industry standards, your business could face a lawsuit.

For more detailed explanations of professional liability lawsuits your business could face, see these examples.

How does professional liability insurance protect my small business?

Professional liability insurance pays for your legal expenses if you're sued over a work mistake. Lawsuits – even over a false accusation – can easily cost between $10,000 and $100,000, depending on the length and complexity of the dispute, as well as the willingness of your client to settle.

These lawsuits are particularly expensive because they involve more than one type of cost. For instance:

  • You'll have to pay a lawyer $150 to $400 per hour for the time they spend on your case.
  • Your legal team will charge you for administrative costs such as copying, data processing, shipping, and travel expenses.
  • For certain filings and hearings, you'll have to cover court costs.
  • You might have to pay expert witnesses thousands of dollars to explain a technical aspect of your argument.
  • You might have to pay a settlement to avoid trial or a court-ordered judgment if you lose at trial.

Does professional liability insurance cover frivolous lawsuits?

Yes. Even if your business wasn't at fault, a client who believes you caused their financial loss might sue you. Professional liability insurance covers your legal expenses even if the lawsuit never makes it to court.

How to buy professional liability insurance with Insureon

How quickly can I get insurance coverage with Insureon?

It takes just a few minutes to complete Insureon’s online application for professional liability insurance. In most cases, we’ll show you quotes as soon as you finish the application.

Once you select and purchase a policy, we’ll email you a certificate of insurance right away. The certificate of insurance is the formal proof of insurance document that you need to show when you apply for professional licenses or sign certain contracts.

How does Insureon’s professional liability insurance application work?

The professional liability insurance application requires basic information about your business, including its location, number of employees, and estimated revenue.

When you complete the application, you'll receive quotes from multiple carriers. Look them over and pick the one that works best for you. If you need help or guidance, a licensed Insureon insurance agent is available to assist you throughout the process.

How much will professional liability insurance cost my small business?

Small businesses with low risks only pay a small premium for professional liability coverage.

Your professional liability insurance policy covers liabilities specific to your business. Your provider will consider your industry, your claims history, and your services to determine an insurance premium. The options you choose – such as deductibles, policy limits, and types of coverage – will also affect your rates.

There are a few strategies you can use to save on your professional liability premium, such as choosing lower policy limits and bundling your policy. You can also consult with an insurance agent on your business insurance needs, including finding affordable liability insurance policies.

Learn more about the factors that influence the cost of professional liability insurance.

When should I buy professional liability insurance?

As soon as possible. As a "claims-made" policy, professional liability insurance only covers a claim if both the incident and lawsuit happen when the same policy is active. It’s especially important to maintain uninterrupted coverage in states that have lenient statutes of limitations, because years may pass between an incident and the subsequent lawsuit.

Most small business owners purchase a professional liability insurance policy early and maintain the same policy for the life of their business, so there are no gaps in coverage. If you think your business might be exposed, or have let a prior policy lapse, bring it up with your insurance agent. There may be ways to extend your protection.

How do I get a certificate of liability insurance?

Our certificates of liability insurance are digital. We can email you one as soon as your policy is activated. You can also access your certificate online by logging into your Insureon account.

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Professional liability insurance policy changes and claims

What happens if I need to buy more insurance later?

It’s easy to add insurance at a later date. Your insurance agent can adjust the coverage amount on an existing policy, and also provide assistance if you need to purchase additional policies.

What happens if I cancel my professional liability insurance policy?

If you cancel your policy, you run the risk of paying more for coverage later on. Providers usually charge businesses that start and stop coverage higher rates.

Also, canceling a professional liability policy leaves your business exposed to risk. Because it's a "claims-made" policy, it only provides coverage if the incident and the lawsuit happen while the policy is active. In some cases, years can pass before a client decides to sue over an incident.

It’s important to keep your policy active to ensure you’re protected against clients who sue at a later date. Most small business owners keep their professional liability policy in place for the life of their business to prevent gaps in coverage.

How do I make a professional liability claim?

To make a professional liability claim, simply call your insurance provider. Your agent will ask you to provide a description of the incident and basic information such as your name, the business name, and your policy number. Your insurance agent can guide you through the process and provide answers to any additional questions.

Compare professional liability insurance with other policies

Professional liability vs. errors and omissions insurance

Professional liability insurance and errors and omissions insurance (E&O) are two names for the same policy. Another term for it is professional indemnity insurance. Different industries use different terms for this policy. It’s also called malpractice insurance in the medical business.

Read more about professional liability vs. errors and omissions insurance.

Tech professional liability vs. tech errors and omissions insurance

Tech professional liability insurance and technology errors and omissions insurance (tech E&O) both refer to the same coverage, a specialized bundle for tech professionals. Tech E&O bundles third-party cyber insurance with E&O insurance to protect against mistakes and oversights that lead to a data breach or cyberattack at a client's business.

For example, if an IT consultant forgets to upgrade a client's system to the latest patched version, the client could hold the consultant liable if their system is breached.

Professional liability vs. malpractice insurance

Malpractice insurance is a type of professional liability insurance. While the terms are often used interchangeably, they’re not exactly the same. You may need to purchase one or both policies depending on your risks.

Professional liability relates to a healthcare provider’s business activities, while malpractice covers your legal fees and settlement costs if you’re accused of causing a patient’s injury or death.

Read more about professional liability vs. malpractice insurance.

General liability insurance vs. professional liability insurance

General liability insurance offers protection if a third party sues you over a physical injury, property damage, or an advertising injury (libel or slander). Professional liability insurance covers you if you are sued by a client who claims you made a professional mistake that resulted in financial loss.

Almost every business owner could benefit from general liability insurance. Your type of business will determine if you need a professional liability policy.

Read more about general liability vs. professional liability insurance.

Updated: May 22, 2024
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