How much does professional liability insurance cost?

Regardless of insurance policy limits, the average cost of professional liability insurance for a small business is $88 per month. Annual premiums can range from under $400 to over $7,000.

These estimates were derived from an analysis of the median cost of thousands of insurance policies purchased by TechInsurance's small business customers from leading business insurance companies.

The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of business insurance because it excludes outlier high and low premiums.

Your premium largely depends on how likely your business is to face a claim for professional negligence. However, professional liability insurance rates may also be determined by factors such as your business revenue, location, and how many employees you have.

TechInsurance customers pay an average of $88 per month for professional liability coverage.

Premiums range from under $400 to over $7,000 per year. Among our small business customers, 43% pay less than $75 per month for their policies, and 28% pay between $75 and $150 monthly.

Insurance providers look at a range of factors when calculating your professional liability insurance premium, including how much coverage you chose to carry and your industry's unique risks.

Here are the top factors that impact your professional liability insurance costs:

• Policy limits
• Industry
• Deductible
• Location
• Cyber risks
• Claims history
• Number of employees
• Annual revenue

Your type of business and the industry you work in significantly affect the cost of professional liability insurance, also known as malpractice insurance.

This is because different professionals are exposed to different liabilities. On average, higher-risk industries pay higher premiums, while low-risk industries enjoy lower rates.

For example, building designers pay an average of $144 per month for professional liability insurance. This higher-than-average monthly premium is due to increased industry risks and the extensive costs of a lawsuit arising from professional errors.

Other professionals, such as photographers, pay only $42 a month due to their relatively low risks.

You might also need to buy a certain amount of this coverage to comply with state laws, sign a contract, or get licensed in your profession. For example, doctors and insurance agents are sometimes required to obtain coverage to comply with state law.

The following chart illustrates how your business and industry can affect what you'll pay for a professional liability insurance policy.

Policies with high deductibles cost less, but you’ll have to pay that amount before you can collect on a claim. Choosing a deductible that meets your insurance needs while remaining affordable is important for small business owners.

The majority of TechInsurance customers choose a $2,500 deductible for professional liability coverage.

Your company's location can impact your professional liability insurance rates. State laws occasionally require a specific amount of professional liability coverage if you work in certain industries, which can lead to higher premiums.

Real estate professionals are often required to carry professional liability insurance. For example, real estate agents in Wyoming and Colorado must carry E&O to obtain a license.

The following chart outlines the average professional liability insurance costs across different states for TechInsurance policyholders.

If your business deals with sensitive data, such as credit card numbers or phone numbers, it's a good idea to get cyber liability insurance.

You can bundle your professional liability insurance, also called errors and omissions insurance, with cyber coverage in a package called technology errors and omissions insurance. This bundled policy is also known as tech professional liability insurance.

Tech E&O insurance costs depend on the amount of data and the number of employees who can access it. It’s simple math: more people accessing more data increases the chance of a data breach.

For example, large IT consulting businesses with sensitive digital assets would pay more for their tech E&O policy than a smaller technology company with fewer employees.

Insurance companies look at your claims history to determine how risky you are to insure. They factor in both the severity and the frequency of your previous claims.

Small businesses that have made prior professional liability claims will pay more for insurance than those with a clean history.

Practicing risk management to avoid issues, such as errors and delays, can help keep your costs low. Businesses with a clean claims history often benefit from lower rates and other discounts.

Implementing safe business practices and adequately training your staff can keep your overall insurance costs as low as possible.

It's simple: The more employees you have, the more opportunities there are for a client to file a lawsuit. More employees mean more opportunities for accidents, incidents, and errors.

While professional liability insurance is recommended for many small businesses, most state laws require small business owners to carry workers' compensation if they have employees, and commercial auto insurance if they have business-owned vehicles.

Even if you are a freelancer, independent contractor, or sole proprietor, it's still a good idea to carry professional liability coverage to protect yourself from the high costs associated with legal defense. Costs for single-person businesses are often lower than for businesses with employees.

Greater annual business income often leads to higher professional liability premiums for most small businesses.

The more contracts and jobs your business has, the more likely you or your employees are to make an error or accident, which could lead to a lawsuit and subsequent insurance claim.

Smaller companies with lower revenue often have lower professional liability costs.

Growing your business and taking on more jobs, contracts, and employees can lead to increases in professional liability insurance rates.

Professional liability insurance is a crucial coverage option for businesses that provide expert advice or specialized services.

Seasoned professionals can still make errors, oversights, or provide guidance that causes financial loss for their clients. If the client sues, legal fees can escalate to the point where they could sink your business.

Even if you've done nothing wrong, you could still face a costly lawsuit. For example, your business could fall behind on a projected deadline due to no fault of your own or your team, or a client could sue over a scope creep that was out of your hands.

Lawsuits are exceptionally expensive, even if they're frivolous. If you lose the lawsuit, you could end up paying a significant amount in a court-ordered judgment or a settlement.

Professional liability insurance covers legal expenses related to lawsuits, and because the premium is based upon your level of risk and your industry, many small businesses pay a fairly low amount for this type of insurance.

There are several things you can do to keep your professional liability insurance costs low.

Some strategies include:

You can choose to pay your insurance premiums once a month or once a year. While making a smaller payment each month requires less money up front, it may cost more in the long run since insurers often offer discounts to businesses that pay an annual premium.

While it’s possible to purchase professional liability coverage when you start a project and drop coverage when you complete the project, this cost-cutting strategy can backfire.

To collect insurance benefits, your “claims-made” professional liability policy must be active:

• When an alleged mistake occurs
• When the covered claim is filed

Continuous coverage is key if you don't want to pay out-of-pocket for professional liability lawsuits.

Choosing a higher deductible is an easy way to save on your premium, but make sure it's one you can still afford. If you can’t pay your premium, you won't be able to collect on a claim.

Some small businesses may be eligible to bundle cyber liability insurance with their professional liability coverage in a technology errors and omissions policy. Generally, this policy costs less than purchasing the coverages separately.

You can sometimes bundle general liability insurance with professional liability insurance for a discount.

Small businesses with no previous claims on their insurance can expect to pay less for business insurance.

You can avoid claims with a risk management plan for professional liability exposure and cybersecurity threats. This includes:

• Open communication with clients to avoid oversights
• Client approval of every step of a project
• A formal procedure for resolving complaints
• Strict protocols for handling customer data
• Use of firewalls and other security technology to reduce cyber risks
• Educating clients on how to prevent data breaches

The proper risk management processes, as well as the right insurance policies, will help you operate your business with peace of mind.

TechInsurance is a trusted insurance expert for small businesses, including contractors and consultants, with extensive knowledge of the IT sector. We help business owners compare quotes from top-rated providers, buy policies, and manage coverage online.

By completing TechInsurance's easy online application today, you can compare free quotes for professional liability insurance and other policies from top-rated U.S. carriers. TechInsurance insurance agents are available to help answer any questions you may have.

Once you find the right policies for your small business, you can begin coverage in less than 24 hours and get a certificate of insurance for your small business.

Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or find out the average costs for other common types of coverages.