Professional Liability Insurance: What It Covers, Best Options

Professional liability insurance is business insurance that protects you if a client files a lawsuit over an alleged mistake or bad piece of advice. It’s also known as errors and omissions insurance.

If you provide services to clients for a fee, you should have professional liability insurance. Here’s what this insurance covers and where to shop for coverage.

What does professional liability insurance cover?

Professional liability insurance is also called errors and omissions insurance. It can protect businesses against the following kinds of claims, including covering legal and settlement costs:

• Professional negligence or failure to meet a standard of care. Say an architecture firm designs a branch for a local bank. A year later, the bank is sued by a customer because the branch’s bathrooms aren’t compliant with the Americans with Disabilities Act, or ADA. The bank could sue the architecture firm for failing to adhere to professional standards. Read more about architect insurance.

• Failure to deliver a promised service on time. Say a manufacturing plant hires an IT consultant to handle a cybersecurity upgrade. The consultant promises it’ll be finished by the end of the year, but they can’t stick to that timeline. In January — after the project was supposed to be completed, according to the contract — the plant gets hacked. The plant could sue the consultant to recoup the costs of recovering from the security breach. Read more about professional liability insurance for consultants.

• Breach of contract. If an insurance agency’s contract says it will help clients settle claims but, when the time comes, it doesn’t have enough staff to provide that service, clients could claim that the agency violated that contract. Read more about E&O insurance for insurance agents.

• Errors. Medical malpractice insurance is a type of professional liability insurance that protects against claims of professional errors. For instance, if a nurse administers the wrong dosage of a medication to a patient, they could be sued by that patient or their family. Read more about how much medical malpractice insurance costs.

• General professional misconduct. If a college professor routinely grades one student harder than their peers and that student can’t graduate on time, that student or their parents might file a claim against the educator.

Professional liability insurance protects your business regardless of whether legal claims are found to have merit. Your policy can pay out in case of frivolous lawsuits as well as substantiated ones.

Unlike some other types of liability insurance, professional liability policies generally protect against claims of financial losses, not bodily injury or property damage. Medical malpractice insurance is an exception to that rule, though, as are policies for architects and engineers.

What isn’t covered by professional liability insurance?

Professional liability doesn't protect a business against:

• Bodily injury or property damage that customers or clients suffer while you’re doing business; for instance, if they trip and fall in your office or if their personal files are destroyed in a fire. Those are general liability insurance claims.

• Lawsuits filed by employees with allegations like wrongful termination or workplace harassment. For those, a business will need employment practices liability insurance.

• Fraud or criminal action. If you or one of your employees commits a crime or intentionally misleads a client, the resulting professional liability claim isn’t covered.

Who needs professional liability insurance?

Anyone who provides professional services or advice to clients for a fee faces the risks that professional liability insurance protects against. This list can include:

• Accountants.

• Architects.

• Consultants, including management and IT consultants.

• Engineers.

• Financial or investment advisors.

• Insurance and real estate agents and brokers.

• Software developers and graphic designers.

Medical professionals may be required by law to carry medical malpractice insurance. This kind of professional liability insurance specifically protects physicians, dentists, nurses, psychologists and other medical professionals against claims that they made a mistake that led to a patient’s injury or death.

Professional liability insurance may be required in other fields as well. For example, state licensing bodies may require lawyers to carry legal malpractice insurance or to tell clients whether or not they have it.

How much is professional liability insurance?

The median cost of professional liability insurance is $59 per month, according to online insurance marketplace Insureon, but prices can vary. For instance, new Progressive insurance customers paid a median of $42 per month in 2021, according to that company.

The cost of professional liability insurance depends on:

• How common lawsuits are in your industry.

• The location where you work and how common claims are there.

• How much coverage you need.

• How many employees you have.

• How long you’ve been in business.

• What kind of claims, if any, you’ve filed in the past.

The best way to find out how much professional liability insurance will cost for your business is to get a quote.

How to find the best professional liability insurance

In general, all major insurance companies offer professional liability or errors and omissions insurance. If you already have business insurance, ask your insurer if you can add a professional liability policy to your coverage. Some insurance companies offer multipolicy discounts.

That said, NerdWallet recommends getting multiple business insurance quotes to find the lowest rates and best coverage.

Consider the following companies that offer professional liability insurance.

Chubb

Best for: Best overall professional liability insurance.

Chubb sells professional liability insurance online to businesses with less than $1 million in revenue. This company received high marks from NerdWallet for its financial strength and the ease with which shoppers can buy policies online. It also ranked second-highest for customer satisfaction in J.D. Power's 2022 U.S. Small Commercial Insurance Study. Read NerdWallet’s review of Chubb small-business insurance.

The Hartford

Best for: Adding professional liability insurance to a business owner’s policy.

If you also need general liability and commercial property insurance, a business owner’s policy may be your best bet. The Hartford offers a BOP to which you can add data breach coverage and professional liability coverage. You can get a quote on The Hartford’s website, and some businesses may be able to buy coverage online. Read NerdWallet’s review of The Hartford small-business insurance.

biBERK

Best for: Buying professional liability insurance online.

BiBERK, a division of Berkshire Hathaway, sells professional liability insurance online or over the phone. You should be able to get a quote online in a matter of minutes, making it easy to compare biBERK’s offering with other providers. Read NerdWallet’s review of biBERK small-business insurance.

Hiscox

Best for: Businesses that do work outside the U.S.

Hiscox’s professional liability insurance policy provides coverage for work done overseas, as long as the claim is filed in the U.S. (or one of its territories) or Canada. You can get a quote online, and like The Hartford, some businesses may be able to complete their purchase online. Read NerdWallet’s review of Hiscox small-business insurance.