Get your best professional liability insurance quote for free

What is commercial professional liability insurance?

Commercial professional liability insurance – sometimes known as errors and omissions insurance – is coverage meant to cover your business’ professional mishaps (alleged or otherwise).

Business owners that provide a service, such as doctors, lawyers, accountants or consultants with expertise in a specific area – all require this insurance. Why? Because your standard general liability insurance does not cover claims against things like negligence, malpractice or mistakes. Professional liability insurance does.

Who needs professional liability insurance?

People offering a particular service or specialized expertise should have professional liability insurance. The same is true for professionals who create and sell products for customers.

Some types of professionals who would benefit from liability insurance include:

• Freelance consultants or service providers
• Doctors or other health practitioners
• Financial professionals, such as accountants
• Real estate agents who provide information and work on large financial transactions
• Architects, engineers and IT professionals
• Contractors

What’s covered and not covered by professional liability insurance

Insurance is not a guaranteed protection for all claims. Honest mistakes or errors can be covered, but behaviour with intent to harm or harass is excluded.

As you can see, if you wilfully damage another person or violate regulatory rules, your insurance will not protect you. However, even the most diligent service provider will make mistakes, and liability insurance will cover you against an array of third-party claims.

How much does professional liability insurance cost?

The cost of professional liability insurance depends on you and the type of business and industry you are in. Your annual income or revenue, as well as years of experience, will also play a factor in cost.

Prices for professional liability insurance can range from about $250 to $500 per year for about $100,000 worth of coverage. It could go higher depending on your profession. Talk to your provider about how much is appropriate for your specific needs.

Types of insurance claims common to professional liability insurance

It’s impossible to list all the most common types of claims for professional liability insurance, but here are some examples:

Professional negligence
This can arise when a professional, such as a lawyer or accountant, makes a mistake that causes financial distress to their client.

In this case, damages could include costs incurred by the client, but insurance may cover legal fees and monetary damages.

Let’s say you’re an accountant. You make a mistake in your calculations, which later leads to your client paying more debt than they expected. They sue you for negligence, and your total expenses – including monetary judgement and legal fees – amount to $230,000.

Financial loss
A client sues you for financial loss after your product or service did not deliver on a promise of increased revenue. Your professional liability insurance policy would cover legal expenses and settlement fees.

Let’s assume you’re in the software development business. You provide the software you were contracted to build, but it turns out it can’t deliver on the client’s expected results, leading to financial losses for their business. As a result, they sue you, which costs you $43,000 – including legal fees and monetary judgement.