If you or your business provide professional services or advice to other businesses or individuals, your counsel or service could lead to losses by your client for which you could be held responsible. These losses are covered professional liability insurance, also known as errors and omissions insurance (E&O).
Claims not covered by general liability insurance that are covered by professional liability insurance include misrepresentation, negligence, inaccurate advice, violation of good faith, and fair dealing.
What types of businesses need professional liability insurance?
In some states, professional liability insurance is required, especially for doctors and lawyers. Legal and medical malpractice insurance policies are special types of professional liability insurance.
Other professionals that should consider professional liability insurance include:
- Information technology (IT) consultants
- Graphic designers
- Real estate agents and brokers
- Insurance professionals
- Software developers
- Investment advisors
- Management consultants
This list is not all-inclusive. Consult with your us or inquire with your profession’s trade association to determine if you might need professional liability coverage.
What's covered… and what's not
There are two types of professional liability polices: claims-made and occurrence. Most professional liability insurance policies are "claims-made," meaning that the policy must be in effect both when the event took place and when a lawsuit is filed. If, however, you change careers or retire, you may want to purchase an "occurrence" policy that will cover any claim for an event that took place during the period of coverage—even if the suit is filed after the policy expires.
Professional liability insurance will pay the cost of legal fees against claims and judgments against you, up to the limit of the policy. In general, coverage does not extend to non-financial losses or losses caused by intentional, dishonest or criminal acts. Other fees, such as licensing board penalties, may also be included. Policies will generally have a deductible ranging from $1,000 to $25,000. The amount of professional liability insurance you will need and how much it will cost depends upon the size of your business and the level of risk it poses. Please consult us concerning the amount and type of professional liability insurance you may need.
You may be able to include professional liability coverage in a Commercial Package Policy (CPP) as an endorsement. Note, however, the professional liability coverage is not included in an in-home business policy or Business Owners Policy (BOP).