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.
The circumstances that lead to potential professional liability claims are common in some industries:
For more detailed explanations of professional liability lawsuits your business could face, see these examples.
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:
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.
It takes just 15 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.
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.
It depends. Your professional liability insurance policy will cover 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. Learn more about the factors that influence the cost of 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.
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.
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.
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.
Professional liability insurance and errors and omissions insurance (E&O) are two names for the same policy. Different industries use different terms for this policy. It’s also called malpractice insurance in the medical business.
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.