Professional Liability Insurance for Service Providers

What Is Professional Liability Insurance?

Professional liability insurance, also called errors and omissions insurance, protects businesses that provide professional services, advice, or expertise. This coverage responds when clients claim your professional services caused them financial harm due to errors, omissions, negligence, or failure to deliver promised services. It covers legal defense costs, settlements, and judgments.

Why You Need Professional Liability Insurance

• General liability policies exclude professional services claims
• Even excellent professionals can face allegations of mistakes
• Legal defense costs can devastate small businesses financially
• Many clients require proof of coverage before engaging services
• Protects your personal assets from professional liability claims
• Covers claims even after you complete the project

Who Needs Professional Liability Coverage?

Any business providing professional services, advice, or expertise should carry this coverage. This includes consultants, technology firms, accountants, architects, engineers, real estate professionals, insurance agents, marketing agencies, and healthcare providers. If clients rely on your expertise or professional judgment, you need professional liability insurance.

Common Professional Liability Claims

Claims arise from various professional mistakes or allegations. Errors in delivered work, missed deadlines that cause client financial loss, failure to perform services as promised, negligent advice that leads to poor outcomes, breach of professional duty, and misrepresentation of expertise or capabilities all trigger professional liability claims.

Understanding Claims-Made Coverage

Professional liability policies typically operate on a claims-made basis rather than occurrence basis. This means the policy must be in force both when the error occurs and when the claim is made. When switching carriers or canceling coverage, purchase tail coverage to protect against future claims for past work.

How Professional Liability Differs from General Liability

General liability covers bodily injury and property damage to third parties. Professional liability covers financial losses clients suffer due to your professional services. You need both coverages. General liability won't respond if a client claims your consulting advice caused financial harm, and professional liability won't cover if someone trips in your office.