Professional liability insurance, also called errors and omissions insurance, protects small businesses against the costs of client lawsuits over unsatisfactory work.
Provides financial protection against lawsuits. If a client files a lawsuit over the quality of your professional work, this policy can cover your legal costs. For example, if a construction contractor is sued for project delays, professional liability insurance could cover their legal costs.
Helps you comply with the law. Depending on your type of work, state laws might require you to carry professional liability insurance. For example, real estate workers often need this coverage. Lawyers and healthcare professionals might need to carry malpractice insurance – another term for this policy.
Fulfills client contracts. Your clients might ask you to produce a certificate of insurance as proof of professional liability coverage, or include it in the terms of a freelance contract.
Boosts you above the competition. Clients might choose to hire a general contractor who has professional liability coverage over one who is uninsured.
Professional liability insurance covers the legal costs of lawsuits over the quality of your work, including:
This policy also protects against false allegations. For example, a client might blame an architect for a structural flaw caused by the client's own choice of materials. Professional liability coverage would pay for the architect's legal defense if the case went to court.
Sole proprietors and independent contractors can be held responsible for errors and oversights that financially harm their clients. If a client files a lawsuit, E&O covers your legal expenses, including a settlement or judgment.
If you don't have coverage, the businesses you work with might have to take on your legal costs – which is why they want you to be insured. For example, say an event planner hires your catering business for a client's convention and someone claims they got food poisoning. The client could name both parties in a professional liability lawsuit. If your catering company doesn't have coverage, the event planner might end up paying for your legal costs, including a settlement or judgment.
Your E&O policy gives your business partners and clients peace of mind, and may lead to them choose you over an uninsured competitor.
Unlike a general liability policy and some other policies, businesses and sole proprietors cannot extend their E&O coverage to independent contractors or subcontractors by naming them as an additional insured on their professional liability insurance. Instead, contractors must purchase their own insurance.
Small business owners and independent contractors should consider additional business insurance policies, including:
Complete Insureon’s easy online application today to compare professional liability insurance quotes from top-rated U.S. insurers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.