Professional Liability

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What is professional liability insurance?

Professional Liability Insurance

Professional Liability Insurance

Professional liability insurance protects small businesses by covering legal defense costs, settlements, and judgments from client lawsuits claiming that work was unsatisfactory.

Does your small business need professional liability protection?

Professional liability insurance is designed for businesses that make a living off their expertise.

Even the most experienced and thorough professional service provider makes mistakes. Unfortunately, clients may not be so understanding if your error costs them considerable time or revenue.

A Professional liability policy helps protect you from unsatisfied clients. For example, if you miss a project deadline, make an omission in your work, or provide ineffective business advice, your client may sue.

If you’re served with this type of lawsuit, your professional liability policy will cover legal defense costs up to your policy limit.

Does professional liability insurance cover losses related to the coronavirus (COVID-19)?

Professional liability protects your business when a client sues over your work performance. That means it might provide coverage when a client sues over a project you were unable to finish or a deadline that you missed due to the coronavirus.

Keep in mind that many business insurance policies exclude communicable disease coverage. If you think you’re eligible for a claim, contact your insurance company’s claims department.

Professional Liability Coverage

Professional liability insurance typically covers:

  • Work mistakes and oversights
  • Undelivered services
  • Missed deadlines
  • Claims of negligence

While most of these terms are clear-cut, claims of negligence can be more complicated.

When a client hires you based on your specialized skills, they are entitled to a reasonable standard of care. If your work causes financial damage to a customer, you can be accused of professional negligence.

Do some clients require you to carry professional liability insurance coverage?

Yes, clients may request a certificate of insurance as proof that you have coverage. They want peace of mind that if you don’t meet their standards, they can recoup their losses.

Maintaining your professional liability coverage offers you the same assurance.

Many professional liability policies are written on a “claims-made” basis with a retroactive date. This means that in order to collect your insurance benefits, your professional liability policy must be active:

  • When an alleged mistake occurs, and
  • When the claim is filed

With a claims-made professional liability policy, your coverage kicks in only when you file a claim during the policy period. Continuous coverage is key if you don’t want to pay out of pocket for lawsuits.

How much does professional liability insurance cost?

Professional Liability Cost

There are several factors that affect a professional liability premium, including:

  • Industry and risk factors
  • Coverage limits and deductible
  • Business size
  • Day-to-day operations
  • Claims history

Professional liability insurance costs about $60 per month. Most of our small business customers (48%) pay between $500 and $1,000 per year for their policies.

How does professional liability insurance protect different professionals?

  • Accountants and auditors

    Professional liability coverage for accountants and auditors covers the costs of lawsuits based on accounting errors, data entry errors, miscalculations, or lost documentation. Because the policy offers indirect financial protection for the client, some clients will require proof of insurance before they agree to work with your firm.

  • Architects

    Architects can get professional liability protection against accusations that a building design does not meet project specifications, was delivered late, or contained errors. A client contract might include a clause that requires this policy’s protection.

  • Consultants

    Professional liability insurance for consultants offers financial compensation for lawsuits alleging ineffective advice or inaccurate projections. Some clients may ask you to provide proof of professional liability insurance before they agree to work with you.

  • Engineers

    Professional liability insurance for engineers covers financial protection from lawsuits over disputes such as cost overrun, delivery delays, and problems with construction materials. You may need to provide proof of professional liability insurance to a client, partner, or licensing board for some projects.

Is there a difference between professional liability
and errors and omissions insurance?

The short answer is no. Different industries use different terms for the same type of coverage. You may also see professional liability insurance called errors and omissions (E&O) insurance, even though they’re identical except for the name.

Errors and omissions insurance is used most often for insurance agents, real estate agents, tax preparers, and IT professionals.

Lawyers and doctors refer to this policy as legal or medical malpractice insurance. (While IronPoint doesn’t offer quotes for malpractice insurance, our licensed agents are happy to provide doctors and lawyers the other critical insurance they need.)

How does professional liability insurance differ
from general liability insurance?

General liability and professional liability both protect against common small business liability claims, but they cover different types of lawsuits.

General liability insurance covers customer bodily injuries, customer property damage, and advertising injuries. In contrast, professional liability policies covers any legal defense costs when a client or customer suffers a financial loss due to your professional services or advice.

Start a Professional Liability
Insurance Quote

Request a professional liability quote with a specialist. We shop your
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Call 1-877-334-7646 to speak with a business specialist

Got professional liability questions?

Which businesses need professional liability protection?

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:

  • 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.

How does professional liability 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 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.

Is it easy to buy professional liability coverage?

How quickly can I get insurance coverage?

It takes just a few minutes to complete our online application for professional liability insurance. In most cases, we’ll show you quotes shortly after you complete your quote. Once you elect to 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 the professional liability 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 IronPoint insurance agent is available to assist you throughout the process.

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 online account.

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IronPoint Insurance Services, LLC is an independent insurance agency licensed (#0G87821) with the California Department of Insurance. We are authorized agents for many A+ rated Arizona, California, Colorado, Nevada and Utah insurance companies. We provide consumers with online, phone, and in-person insurance services through our insurance company relationships.

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