Frequently asked questions about professional liability insurance

Businesses that offer a professional service or give advice to clients need professional liability insurance (also known as errors and omissions insurance or E&O insurance). It can help protect against dissatisfied clients who file a lawsuit over a mistake, missed deadline, or another complaint related to the quality of your work.

This includes:

• If a client has unmet expectations based on a miscommunication or an error in a contract, email, or order form
• If you give erroneous instructions or advice that results in a financial loss for your client
• If your work is late, incomplete, or fails to meet industry or client standards

Even though it is generally not required by law, it's a good idea for any small business that provides professional advice or services to get professional liability insurance. Not only will this coverage provide vital financial protection, it will offer you peace of mind as you work.

Professional liability insurance pays for your legal expenses if you're sued over a work mistake. Lawsuits – even over a false accusation – can easily cost between $10,000 and $100,000, depending on the length and complexity of the dispute, as well as the willingness of your client to settle.

These lawsuits are particularly expensive because they involve more than one type of cost. For instance:

• You'll have to pay a lawyer $150 to $400 per hour for the time they spend on your case
• Your legal team will charge you for administrative costs such as copying, data processing, shipping, and travel expenses
• For certain filings and hearings, you'll have to cover court costs
• You might have to pay expert witnesses thousands of dollars to explain a technical aspect of your argument
• You might have to pay a settlement to avoid trial or a court-ordered judgment if you lose a trial

Yes. Independent contractors and sole proprietors often have the same risks as small businesses. For example, a client could sue an IT consultant or cybersecurity expert for an IT or security program that did not meet their expectations or had a coding error that resulted in financial loss.

Professional liability coverage protects independent contactors and sole proprietors by paying for lawsuits related to a mistake or oversight. In order to sign a contract, some clients may require you to carry this policy.

Yes. Even if your business wasn't at fault, a client who believes you caused their financial loss might sue you. Professional liability insurance covers your legal expenses even if a frivolous lawsuit never makes it to court.

The average cost of a professional liability policy is $61 per month. Your exact cost may be more or less depending your risks.

To calculate an insurance premium, your insurance provider will consider several factors, including your profession's level of risk, claims history, deductible, policy limit, and business size.

The options you choose – such as deductibles, policy limits, and types of coverage – will also affect your rates.

With TechInsurance, you can compare quotes from top-rated insurance providers. This offers you an easy way to save money on professional liability coverage.

Beyond comparison shopping, you can also save money on insurance by:

• Bundling policies for a discount (e.g., technology errors and omissions insurance)
• Choosing low policy limits
• Choosing a high deductible
• Managing your risks
• Communicating with your clients to avoid claims

Learn more ways to save money on professional liability insurance.

TechInsurance is a trusted insurance expert for all small businesses, including startups, consultants, limited liability companies (LLCs), and freelancers, with extensive knowledge of the technology sector.

Professions that commonly partner with TechInsurance for their insurance needs include:

• Software developers
• App developers
• IT consultants
• Cybersecurity professionals
• Computer repair and service businesses
• SaaS companies

It takes just a few minutes to complete TechInsurance's free online application for professional liability insurance. In most cases, we’ll show you quotes as soon as you finish the application. A licensed TechInsurance insurance agent can talk through your options with you before selecting the policy of your choice.

Once you select and purchase a policy, we’ll email you a professional liability certificate of insurance right away. The certificate of insurance is the formal proof of insurance document that you need to show when you apply for professional licenses or sign certain contracts.

The professional liability insurance application requires basic information about your business, including its location, number of employees, and estimated revenue.

When you complete the application, you'll receive quotes from multiple carriers. Look them over and pick the one that works best for you. If you need help or guidance, a licensed TechInsurance insurance agent is available to assist you throughout the process.

As soon as possible. As a "claims-made" policy, professional liability insurance only covers a claim if both the incident and lawsuit happen when the same policy is active. It’s especially important to maintain uninterrupted coverage in states that have lenient statutes of limitations, because years may pass between an incident and the subsequent lawsuit.

For example, a lawyer might give legal advice that they are sued for years later. If they let their professional liability policy expire, they could end up paying for legal defense costs out of pocket.

Most small business owners purchase a professional liability insurance policy early and maintain the same policy for the life of their business, so there are no gaps in coverage. If you think your business might be exposed, or have let a prior policy lapse, bring it up with your insurance agent. There may be ways to extend your protection.

Once you’ve paid for your professional liability policy, there are two ways to obtain an ACORD certificate of liability insurance with TechInsurance:

• We can email you your professional liability insurance certificate
• You can access your certificate of insurance by logging into your account

This form is the proof of insurance required by commercial leases, client contracts, and applications for certain professional licenses.

It’s easy to add insurance at a later date. Your TechInsurance insurance agent can adjust the coverage amount on an existing policy, and also provide assistance if you need to purchase additional policies.

If you cancel your policy, you run the risk of paying more for coverage later on. Providers usually charge higher rates for businesses that start and stop coverage.

Also, canceling a professional liability policy leaves your business exposed to risk. Because it's a claims-made policy, it only provides coverage if the incident and the lawsuit happen while the policy is active. In some cases, years can pass before a client decides to sue over an incident.

It’s important to keep your policy active to ensure you’re protected against clients who sue at a later date. Most small business owners keep their professional liability policy in place for the life of their business to prevent gaps in coverage.

Read more about what you should consider before canceling a policy.

To make a professional liability insurance claim, contact your insurance provider directly. They will ask for:

• A description of the incident
• Basic information about your business
• Your policy number

Your insurance agent can help guide you through the process and answer any additional questions.

Professional liability insurance and errors and omissions insurance (E&O) are two names for the same policy. Different industries use different terms for this policy. It’s also called malpractice insurance in the healthcare industry.

Read more about errors and omissions insurance vs. professional liability insurance.

General liability insurance offers protection if a third party sues you over a physical injury, property damage, or an advertising injury (for example, libel or slander). Professional liability insurance covers you if you are sued by a client who claims you made a professional mistake that resulted in financial loss.

Almost every business owner could benefit from general liability insurance. Your type of business will determine if you need a professional liability policy.

Read more about the differences between general liability and professional liability insurance.