What is professional liability insurance?
Professional liability insurance covers mistakes in your work.
Also known as errors & omissions insurance, E&O, or professional indemnity insurance, this is protection for claims that you have failed to provide your services appropriately, causing monetary or reputational damage.
Mistakes happen. But the kind of mistakes that lose your customers money can lead to expensive legal fees, court dates, and long claims processes, and all of those things get in the way of you building your business. Let’s go over the basics of this small business essential.
What does professional liability insurance cover?
While general liability insurance covers you in the event of third-party bodily injury or property damage, professional liability insurance protects you providing or failing to provide professional services resulting in financial loss. Your policy can provide coverage for these key things:
Actual or Alleged Negligence
The insurer does the legwork in determining what happened when a customer claims that you (or members of your crew) were negligent in completing your work, such as missing a deadline or not acting professionally.
Defense of Claims
The insurer defends you in legal proceedings related to claims that you didn’t follow through on a portion of your deliverable or service, be it the word count on an article or the file format of a wedding video.
False or Frivolous Claims for Damages
Along with helping to cover the costs of valid claims, the policy will defend you against claims that ultimately have no merit.
Who needs professional liability insurance?
In a nutshell, professional liability is insurance for pros.
If your clients rely on you for professional consultation, skills, or specific knowledge, from event planning to notarizing documents, they can also claim that negligence in those services resulted in a financial loss on their part. For many businesses, professional liability is optional, but some professions in the medical, government, and legal fields require professional liability insurance in order to secure a license. Other types of businesses that commonly need professional liability coverage include:
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Why is professional liability important?
If you provide expert services, professional liability can help protect your assets against claims of negligence or mistakes.
In some cases, a contract, professional affiliation, or state law may require businesses to carry professional liability coverage. But even if it’s not required, professional liability insurance shows prospective clients that you are a legitimate business worthy of their trust.
How much does professional liability insurance cost?
On average, small business owners typically pay around $45 per month or $500 per year for professional liability insurance.¹
The cost of professional liability insurance will vary based on a few factors—mainly what you do and where you work. Your industry determines how much you’re exposed to risk, as some jobs come with a higher likelihood of professional liability. As with any insurance policy, the cost varies based on your specific business’s details, but policies arranged by Thimble start at $36 per month.
What other kinds of business insurance do I need?
While professional liability insurance is designed to protect your business from risks associated with negligence, the total picture of protecting your assets includes a few other essential types of insurance.
General Liability Insurance
Protects your business against claims of third-party bodily injury, property damage, and personal and advertising injury.
Workers’ Compensation
Protects your business if you have employees or workers of any kind. This coverage applies to medical expenses and lost wages associated with work-related injuries and illnesses.
Business Equipment Protection
Protects the equipment you own and use for work, from a lawn mower to a camera. Also known as inland marine insurance, this is a type of property insurance that covers your stuff.
Business Owner's Policy (BOP)
Designed for small business owners who need a few types of coverage. BOP is a bundle that usually protects you against damage to owned property, liability, and business interruption.
Professional Liability Insurance FAQs
Is professional liability insurance required by law?
Professional liability insurance is legally required for some professions and roles, specifically in the medical and legal industries. However, even if it’s not legally required, your clients may contractually require you to have a professional liability insurance policy. Make sure you understand the terms of your contract.
Professions required to carry professional liability insurance:
Medical professionals must carry medical malpractice insurance, an industry-specific type of professional liability coverage. This applies to doctors, nurses, rehabilitation professionals, physician’s assistants, and other employees in allied health care settings
Lawyers are often required to carry professional liability coverage, or at least inform their clients if they are practicing without insurance.
Government contractors may be required to carry professional liability insurance.
Some professionals are required to carry professional liability insurance in order to be licensed or to perform certain functions in certain jurisdictions.
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If you have any questions, give us a call at JJC Insurance Agency 215-650-9292 or book online.
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