All it takes is a few clicks.
Years Proudly Serving Our Customers
Small Business Customers
ETHISPHERE: World's Most Ethical Company**
What Is Professional Liability Insurance?
Professional liability insurance protects businesses when employees make mistakes in the professional services they’ve provided to customers or clients. This coverage is also known as errors and omissions insurance (E&O). Even if you’re an expert in your business, mistakes happen. And if your client or customer thinks a mistake in your professional services caused a financial loss, they can sue you.
What Does Professional Liability Insurance Cover?
Professional liability insurance for small businesses can help protect against claims of:
- Negligence: If services you or your company provided result in damage or injury to a client.
- Misrepresentation: If a client claims that false or misleading information convinced them into a contract agreement with you or your company, which lead to damages to the client.
- Inaccurate advice: If a customer claims you provided advice that caused them damage.
- Personal injury: If someone accuses you or your business of libel or slander, whether it’s true or not.
- Copyright Infringement: If someone claims you or your business used their copyrighted work without their permission.
- Defense costs: Professional liability insurance can help cover your defense costs if a client sues you for mistakes in the professional services you provided them. Defense costs include attorney fees and other court-related expenses.
Even if you didn’t do anything wrong and believe you’ve made no mistakes, your client can still sue your business. Without coverage, you’ll have to pay expensive legal defense costs out of pocket.
Professional liability insurance can help your business if:
- Your accounting firm makes a clerical error that costs your client thousands of dollars.
- A client sues your florist shop for errors in the services you provided after you failed to deliver flowers on time for their wedding.
- Your real estate firm recently sold a townhouse to a couple that was planning on starting a daycare. However, when the couple moved in, the townhouse association informed them they couldn’t use the property for a business. The new owners decide to sue you for negligence.
What Professional Liability Insurance Doesn’t Cover
Professional liability insurance doesn’t cover every kind of claim. It won’t help your business with claims of:
- Bodily injury or property damage: You’ll want to get a general liability insurance policy to help cover claims that your business hurt somebody or damaged their property.
- Work-related injuries or illnesses: If your employees get hurt or sick from their job, you’ll need a workers’ compensation insurance policy to help them recover and return to work.
- Data breach: If your business loses personally identifiable information (PII), data breach insurance can help you respond to the breach. Some insurers call this coverage cyber liability insurance.
How Professional Liability Insurance Works
Many insurance companies write a professional liability insurance policy on a claims-made basis with a retroactive date and extended reporting period.
The retroactive date means you’re covered for incidents that happen on or after a specified date in your policy.
The extended reporting period helps cover claims filed within a certain time after your policy expires. This is generally a 30- to 60-day period, but you can extend this period to a year or more for an additional cost.
Your insurance company only covers claims against your business during your policy period within the extended reporting period. And the claim must be from a covered error or omission that happened after your policy’s retroactive date. It can help cover:
- Legal defense costs
- Disciplinary proceedings
- Loss of earnings
- Subpoena assistance
Some policies can also be written on an occurrence policy. This means there will be coverage for losses that happen during your policy period, even if the claim gets reported after your policy expires.
Since the claim was reported during the policy period and the loss occurred after the retroactive date, it would be eligible for coverage under a claims-made policy.
If a claim is brought after the policy’s expiration, it can get coverage if it’s reported within the extended reporting period.
Who Should Get a Professional Liability Policy?
You may be wondering who needs professional liability insurance. It’s an important coverage that business owners who provide a service to a client or customer should have. You’ll want to get professional liability insurance coverage if you:
- Have to sign a contract that requires you to carry coverage
- Offer professional services directly to customers
- Regularly give advice to clients
Be aware that some states require this type of business insurance.
Even insurance agents need liability protection, which is why The Hartford offers E&O insurance for insurance agents.
Interior Design Business
Jane owns an interior design business. Recently, a client's custom furniture didn't fit and now Jane is being sued. Luckily, Jane is an insured professional and has a Business Owner's Policy with professional liability insurance, which will help pay for her legal fees.
Many small business owners don’t realize the big benefits of professional liability insurance.
IT Professionals are required to carry general liability insurance.
States and hospitals require healthcare professionals to carry professional liability insurance.
How Does It Help?
Professional liability insurance protects against common claims like negligence, misrepresentation and inaccurate advice. It will also help cover violations of good faith and fair dealing. If a client sues you, this policy may help pay your legal expenses.
To learn more about professional liability insurance, get a quote from us today.
How Much Does Professional Liability Insurance Cost?
Your cost is unique to your business. What you pay for professional liability insurance will vary by product, limits chosen and risk class or hazard group of your business.
|Avg. Minimum Monthly Premium***
|Misc. Professional Liability Standalone Coverage
|Misc. Professional Liability Endorsements
|Architects and Engineers Professional Liability
|Healthcare Professionals Professional Liability
|Varies depending on type of practice, $300-$1,500
|Errors & Omissions Insurance for Technology Companies
|Varies by state, $350-500
*** Quotes will vary by business depending on the size of your business, the state your business is located in, coverage limits chosen, and the risk class your business is associated with.
Factors that can impact your professional liability insurance cost include:
- Policy details, like coverage limits
- Type of business
- Business size, number of employees and clients
- Years in business
- Claims history
When you’re ready to get a professional liability insurance quote, it’s a good idea to have important business documents on hand, such as:
- Copies of contracts
- Documentation procedures
- Any information about previous errors and omissions coverage
- Quality control processes
- Employee training initiatives
You can work with our specialists to get the right amount of errors and omissions (E&O) insurance coverage for your business. Backed by more than 200 years of experience, we can help protect you with professional liability insurance for small business.
Professional Liability Insurance FAQs
What’s the Difference Between Professional Liability Coverage and General Liability Coverage?
The main difference between general liability and professional liability is in the types of risks they cover. General liability insurance covers physical risks, such as bodily injuries and property damage. Professional liability insurance covers more abstract risks, such as errors and omissions in the services your business provides. To make sure your business is fully protected, it’s a good idea to carry both types of insurance.
Will Professional Liability Insurance Cover Me Even if the Lawsuit Is Baseless?
Yes, professional liability insurance coverage can help protect your business even if the claim against your business is determined to be baseless.
Why Is Professional Liability Insurance Important?
If your business offers professional services and you don't have professional liability coverage, you can be held liable if a customer believes you made a mistake. Even if it didn’t cause them financial loss, you can still get sued.
What Are the Two Basic Types of Professional Liability Coverage?
The two main types of professional liability insurance coverage are claims-made and occurrence.
If the professional liability policy is written on a claims-made basis it has a retroactive date and extended reporting period. The retroactive date covers incidents that happen on or after a specified date in your policy. The extended reporting period helps cover claims filed within a certain time after your policy expires.
For an occurrence policy, you’ll have coverage for losses that happen only during your policy period, even if the claim gets reported after it expired.