What Is Covered by Professional Liability Insurance?

Put simply, professional liability insurance—also known as errors and omissions (E&O) coverage—can help protect your business if the work or advice you provide results in client losses and subsequent professional negligence lawsuits. This type of policy may apply to professional mistakes ranging from incorrect advice, breach of duty, incomplete work, missed deadlines, misrepresentation and even wrongful acts. In the event of a professional negligence lawsuit, this coverage can help reimburse the associated legal defense expenses and settlement costs. 

This coverage differs from general liability insurance. After all, general liability coverage can protect your business against the resulting expenses if you are held responsible for injuring a third party or damaging their property. Specifically, general liability insurance applies to instances of nonprofessional negligence—that is, the losses suffered by the third party didn’t stem directly from your business’s professional mistakes. Further, general liability is typically included within a business owners policy (BOP), whereas professional liability coverage must be purchased separately from a BOP. 

Who Needs Professional Liability Insurance? 

Professional liability insurance is a critical form of coverage for any business that provides expert advice or services to their clients. As such, this type of insurance is more common among certain industries. The following businesses and professionals are likely to need professional liability coverage: 

Keep in mind that this isn’t a complete list— be sure to speak with a trusted insurance professional about your specific industry’s needs. 

How Much Is Professional Liability Insurance? 

The industry of your business affects the cost of professional liability insurance, as does the size of the company and claims history. Certain industries cost more to insure due to the risk of lawsuits. Medical professionals—such as surgeons—generally pay large amounts in professional liability insurance (also called medical malpractice coverage in the health care sector), since they face some of the highest risk when it comes to negligence accusations.  

Is Professional Liability Insurance Required? 

Depending on the profession, professional liability may be required. For example, clients hiring contractors may require their contractors to carry a minimum amount of professional liability insurance. If you’re unsure about professional insurance requirements, double check industry standards and state laws. Many states don’t require professional liability insurance by law, but allow certain industries to require it.  

For more information on professional liability coverage, consult a trusted insurance professional.