Professional Liability Insurance
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When is professional liability insurance required?

Client contracts often require professional liability insurance. Businesses in certain industries are also required to have this coverage.

Professional liability insurance might be required by your industry or by law

Professional liability insurance, sometimes known as errors and omissions insurance (E&O) or professional indemnity insurance, protects your business from the risks of a lawsuit over professional mistakes or oversights. Clients, governments, and professional licensing organizations all understand that these risks are higher for certain types of businesse

Depending on your industry or clients, you might be required to carry professional liability (E&O) coverage to comply with state laws or industry standards. For example:

Federal government contractors

Federal Acquisition Regulations require businesses working on government projects to carry insurance, including professional liability coverage, for "the perils to which the contractor is exposed." The top industries awarded government contracts include:

Bottom line – any business that provides services under a federal contract probably needs to carry a professional liability insurance policy.

Healthcare providers

Medical malpractice insurance is a professional liability policy for medical professionals such as doctors, nurses, home healthcare providers, and physical therapists. These professionals are often required to carry a minimum amount of coverage by state law, licensing agencies, credentialing authorities, health insurance plans, and hospitals or other healthcare facilities.

Real estate professionals

A number of states require real estate agents and brokers to carry E&O insurance coverage, often mandating minimum levels of coverage. For example, Colorado requires agents to have a minimum $300,000 aggregate limit.

Insurance agents

Some states require insurance agents to carry professional liability insurance, or risk have their license suspended or revoked. For example, Rhode Island requires that insurance agents have coverage with a minimum $500,000 aggregate policy limit in place.

Professionals in many other industries may need to carry E&O insurance to comply with regulations or licensing requirements in their area. Speak with an attorney or insurance agent to learn whether you may be required to carry coverage.


Only Idaho and Oregon currently require that lawyers have professional liability insurance. However, roughly half of all states have adopted disclosure rules that require attorneys to report whether they carry malpractice coverage.

What is the difference between professional liability and E&O insurance?

View video transcript.
Insurance jargon can be difficult to follow when a policy is called by multiple names. One example is professional liability, also known as errors and omissions, or malpractice insurance. The coverage is the same, but the name may depend on the type of business that the coverage is for. For architects and consultants, this policy is called professional liability. In the real estate and IT sectors, it’s errors and omissions. And, for medical and legal professions, it’s known as malpractice insurance. Like most insurance policies, the cost may vary depending on several factors, such as location and industry. Get free liability insurance quotes with Insureon today. Click the link to get started.

Why should you carry professional liability insurance if it's not required?

Protection from lawsuits over job performance

Professional liability insurance is an important part of any risk management strategy – especially if you provide a service or make a living off your expertise. It’s the only business insurance that protects you from lawsuits over your job performance.

While a general liability insurance policy covers legal actions over client injuries or property damage as well as copyright infringement, professional liability insurance covers lawsuits claiming your negligence or mistake caused a client’s financial loss – regardless of fault.

For example, a design error could lead to a costly mishap for an architect. A business consultant could be blamed if a client misses their earnings target. A general contractor could be sued for missing a deadline. In all of these cases, professional liability insurance will help cover defense costs, legal fees, and any judgments or settlements related to lawsuits over a mistake or negligent act.

Letting professional liability coverage lapse could cost you

It’s important to maintain continuous coverage to make sure you’re protected from client lawsuits. Professional liability insurance operates on a claims-made basis, which means you're only covered for incidents and claims that happen while your policy is active.

Your retroactive date is how far back a loss can occur and still be a covered claim under your policy. The best business practice is to get professional liability insurance as soon as you can and maintain the same policy for the life of your business. This reduces your costs and ensures you stay protected.

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What are the benefits of professional liability insurance?

Professional liability insurance protects your business if a client complaint turns into a costly lawsuit, but it has other benefits too:

Professional liability insurance opens up business opportunities

Clients may require your business to produce a certificate of insurance as proof of professional liability insurance coverage before they’ll hire you. This coverage reassures clients that you’ll be able to pay for any harm you may cause.

Carrying professional liability insurance also helps you attract and retain clients. Even if this coverage isn’t required by a client, it demonstrates that you’re trustworthy and dependable and can help you get a leg up on the competition.

Professional liability insurance protects your investments

Any business that offers specialized services or expert advice can get sued over a mistake or an oversight. As these professional liability claim and lawsuit examples illustrate, you could easily face an expensive lawsuit – even if you’re not at fault.

Professional liability insurance provides critical protection from steep legal defense costs and costly judgments or settlements. Without it, your business could be severely damaged. For sole proprietors, it could even put your personal assets at risk.

Keeping the same professional liability policy may lower premium costs

Some small business owners might try to trim their budgets by putting off purchasing professional liability coverage, or canceling their policy when projects seem less risky.

This could be a costly mistake for a couple of reasons:

  • First, the cost of professional liability insurance depends in part on your coverage and claims history. A history of buying and dropping small business insurance is a major red flag for insurance companies. It could result in higher insurance rates and possibly even denial of coverage by an insurer.
  • A professional liability claim could be filed against you even years after a project ends. Without coverage at the time of the project as well as when the lawsuit was filed, the claim will fall outside the policy period and won’t be covered.

Save money by comparing quotes with Insureon

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.

Updated: March 18, 2024
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