Professional liability insurance — also called errors and omissions (E&O) insurance — helps protect businesses and professionals from claims that their advice, services, or work caused a client financial harm. A claim does not have to be valid to require a defense.
What professional liability covers
Legal defense costs: Professional liability can help pay attorney fees, court costs, and expert witnesses when a client alleges your professional work caused financial harm. Defense costs can be significant even when the allegation is inaccurate.
Damages and settlements: If a covered claim results in a settlement or judgment, professional liability can respond up to the policy limit. Many businesses start with $1 million limits, but contracts and risk profile can require more.
Claims of negligence: A client may allege that your advice, service, recommendation, or work product caused financial loss. The claim does not have to be correct for you to need a defense.
Errors and omissions: Missed deadlines, calculation errors, overlooked contract details, or work that does not meet expected standards are common examples of E&O claim triggers.
Personal injury from professional work: Some policies may extend to libel, slander, copyright infringement, or similar claims arising from professional services. Availability and wording vary by carrier.
Claims-made coverage issues: Most professional liability policies are claims-made, so retroactive dates, continuity, and tail coverage can matter as much as the premium. A gap can create a future claim problem.
Who needs professional liability insurance
Consultants and business advisors
Real estate agents and brokers
Accountants and bookkeepers
Marketing and advertising agencies
IT professionals and technology consultants
Interior designers, architects, and engineers
Property managers and home inspectors
Therapists, counselors, and other licensed professionals
Frequently asked questions
What is the difference between professional liability and general liability insurance?
General liability usually focuses on bodily injury and property damage. Professional liability focuses on claims that your advice, work, or services caused a client financial harm. Many service businesses need both because they respond to different claim types.
Is professional liability insurance required by law?
It depends on the profession and state. Some licensed professions have E&O requirements, while many other businesses face contract requirements from clients, lenders, or partners.
What is claims-made professional liability coverage?
Most professional liability policies are claims-made, which means the policy in force when the claim is made is the policy that may respond. Retroactive dates and tail coverage matter if you change or cancel coverage.
How much professional liability insurance do I need?
Which limit to choose depends on your services, client contracts, revenue, and possible claim severity. Many contracts specify minimum limits, so the coverage conversation should include contract review.
Does professional liability cover cyber incidents?
Standard professional liability usually does not cover cyber incidents unless a specific endorsement applies. Businesses that handle sensitive client data should discuss cyber liability alongside E&O coverage.