Professional Liability insurance

Frequently Asked Questions (FAQ)

• How do I know I have the right coverage for my business?

  Embroker has published a bunch of great resources to help you on your insurance buying journey. Check out the Embroker Resource Hub for articles on coverage, guidance on insurance costs, and what you’ll need to get a quote.

  You can also connect with a broker at any time to get help identifying your coverage gaps.

• Do I need Professional Liability insurance if I already have General Liability coverage?

  If you already have general liability insurance, you may think that you don’t need professional liability coverage. However, many liability policies only cover bodily injury, personal injury or property damage, so the most likely of claims (i.e. those related to your services) do not fall under the GL umbrella.

  For example, professional liability can cover you if a customer chooses to file a claim against you related to a service that you either failed to provide entirely or sufficiently. To clarify, if a service you performed did not have the expected or reasonable results in the eyes of your client, you could be sued.

  This means that businesses and professionals operating in industries that require specific expertise will find that general liability insurance policies won’t offer protection against claims that stem from their professional practices – such as malpractice, negligence, or misrepresentation.

• Are there additional coverages available with Professional Liability insurance?

  Below are a few examples of incidents that are not covered by professional liability insurance.

  • Personal Injury or Property Damage: These are usually covered by general liability insurance. For instance, if a client slips and falls in your office, professional liability won’t cover their medical expenses. Professional liability insurance does not cover product-related injuries, either.
  • Employee Injuries or Illnesses: Workplace injuries are typically covered by workers’ compensation insurance, not professional liability. If an employee is injured while working, professional liability insurance won’t apply.
  • Cyber Attacks and Data Breaches: While some technology errors and omissions policies may offer limited cyber coverage, comprehensive protection against cyber risks usually requires a separate cyber liability insurance policy.
    
  • Employee Discrimination Accusations: Costs for lawsuits resulting from harassment, discrimination, and wrongful termination claims are covered by EPLI (employment practices liability insurance) policies. If an employee accuses your company of firing them without cause, professional liability would not cover your business.

  As well, you will not be covered outside of the duration of your policy if the E&O coverage is a claims-made policy.

• Who benefits most from Professional Liability insurance?

  E&O insurance is particularly useful for any business that offers professional services, whether they’re a large firm, small business, or one-person operation. These policies are important and sometimes required for businesses in many industries.

  However, some industries need professional liability insurance coverage more than others. Here are some examples:

  Accountants and CPAs

  • Accountants and CPAs are responsible for managing and reporting on their clients’ financial matters. Errors or negligence in financial reporting, auditing, or tax filing can lead to serious consequences for clients, such as financial losses, penalties, or legal issues. Professional liability insurance protects accountants and CPAs from bearing the full cost of legal defense and settlements in case of mistakes.
  • Example: If an accountant makes a mistake in a client’s tax return, leading to an IRS audit and penalties, professional liability insurance would cover the legal costs and damages. This coverage is essential for accountants and CPAs, as even minor mistakes can result in significant financial repercussions for their clients.

  Bookkeepers and Tax Preparers

  • Bookkeepers and tax preparers handle sensitive financial information and are responsible for maintaining accurate records and preparing tax returns. Mistakes in financial record-keeping or tax preparation can result in costly consequences for clients, like missed tax deductions, penalties, or audits. Professional liability insurance shields bookkeepers and tax preparers from the financial consequences of potential lawsuits.
  • Example: If a bookkeeper fails to properly categorize expenses, causing a client to miss out on tax deductions and incur a higher tax liability, professional liability insurance would cover any resulting financial losses. This coverage is crucial for bookkeepers and tax preparers, as their work directly impacts their clients’ financial well-being.

  Consultants

  • Consultants provide expert advice and recommendations to clients across various industries. Clients rely on this advice to make important business decisions, invest in projects, or implement strategies. If a consultant’s advice or recommendations lead to financial losses or legal issues for the client, the consultant may face a lawsuit. Professional liability insurance protects consultants from the financial consequences of such claims.
  • Example: If a consultant advises a client to invest in a venture that fails, resulting in significant losses, professional liability insurance would cover legal costs and settlements. This coverage is vital for consultants, as their professional opinions and guidance can have far-reaching effects on their clients’ success.

  Real Estate Agents

  • Real estate agents facilitate property transactions and are expected to provide accurate information about properties, zoning, and contracts. Misrepresentations or omissions about a property’s condition, legal status, or other important factors can lead to financial losses or legal disputes for clients. Professional liability insurance safeguards real estate agents from the cost of legal defense and settlements in such cases.
  • Example: If a real estate agent fails to disclose known defects in a property, leading to costly repairs for the buyer, professional liability insurance would cover legal expenses and damages. This coverage is essential for real estate agents, as they are often involved in high-value transactions where mistakes can have substantial financial consequences.

  Home Inspectors

  • Home inspectors assess the condition of properties and provide reports to potential buyers or sellers. Overlooking or misreporting issues during a home inspection can result in significant financial losses for clients, as they may purchase a property with hidden defects or face unexpected repair costs. Professional liability insurance protects home inspectors from bearing the full financial burden of legal claims related to their inspections.
  • Example: If a home inspector fails to identify a significant structural problem, resulting in expensive repairs for the homeowner, professional liability insurance would cover legal costs and settlements. This coverage is crucial for home inspectors, as their reports are relied upon to make informed real estate decisions.

  IT and Technology Professionals

  • IT and technology professionals develop, implement, and maintain systems, software, and networks for clients. System failures, data breaches, or software glitches can lead to significant financial losses, legal issues, or reputational damage for clients. Professional liability insurance protects IT and technology professionals from the cost of legal defense and settlements in case of such incidents.
  • Example: If an IT professional’s software recommendation leads to a data breach and client financial losses, professional liability insurance would cover legal expenses and damages. This coverage is essential for IT and technology professionals, as the systems and solutions they develop and maintain are critical to their clients’ operations and security.

  Healthcare Professionals

  • Healthcare professionals, such as doctors, nurses, and therapists, provide medical care and treatment to patients. Medical malpractice, misdiagnosis, or treatment errors can have severe consequences for patients, including worsened health conditions, additional medical expenses, or even loss of life. Professional liability insurance, also known as medical malpractice insurance, protects healthcare professionals from the financial burden of legal claims related to their professional services.
  • Example: If a healthcare professional makes a diagnostic error that leads to a patient’s worsened condition, professional liability insurance would cover legal costs and settlements. This coverage is vital for healthcare professionals, as the nature of their work involves high-stakes decisions and procedures that directly impact patient well-being.

  These professions require specialized education or training, and their practice must meet certain state, industry, contract, or client standards. Oftentimes, the professional is licensed for their trade. Compromised standards or not living up to the standard of care can lead to expensive legal defense costs or even litigation which will put your company assets at risk and can even endanger your personal assets.

  Really, any small business or large corporation that is providing a service to a client for a fee should look into E&O coverage, whether you’re a dentist, a beautician, or a wedding planner.

  Ask yourself:

  • What is the material impact my services have on my clients and what if I make a mistake or upset a client?
  • Are my clients ever at risk of monetary damages if I make a mistake or give bad advice?
  • Is there a lot of variation in the services I provide from person to person?
  • Do I ever make suggestions or claims that could be construed incorrectly?

  If you’re answering “yes” to these questions, you should have a professional liability policy. Click the “˜Get Started’ button above to get your instant professional liability insurance quote in just a few minutes.

• Why do you need Professional Liability insurance?

  No matter how good you are at doing your job and how long you have been doing it, you are bound to make a mistake every now and then or have a disgruntled client. E&O coverage protects you in the case that you do make a mistake that a customer decides to sue you over.

  For example, if your client in Springfield, Massachusetts needed important products shipped to him for the grand opening of his store, but your company shipped them to Springfield, Illinois instead, you can expect a lawsuit from that customer.

  In some instances, E&O claims aren’t even related to money. A claim can be made for less tangible issues, such as loss of reputation or emotional distress.

• What does Professional Liability cost?

  There are several business factors that will affect how much you’ll have to pay for this type of insurance, including:

  • Size: Larger companies with more employees have a greater chance that one of them will make a mistake. These businesses typically pay higher premiums.
  • Industry and risk: The specific nature of your business and associated risks may impact your premium. For instance, architects and web-designers face vastly different levels of risk, because the nature of their services differs.
  • Location: Companies based in areas with high claims rates or in highly populated urban centers will usually pay more.
  • Furthermore, many U.S. states will have minimum coverage provisions in place for specific industries. Businesses operating in these states can expect their premiums to be higher. 
  • Claims history: Previous claims can increase your premium.
  • Policy limits and deductible: Higher coverage limits generally result in higher premiums, while a higher deductible can lower your premium.

• Does it have a deductible?

  Like most coverages, professional liability insurance does have a deductible. A deductible represents a certain amount of money that a business will have to pay out of pocket before its coverage kicks in. Typically, the higher your deductible is, the lower your premium will be.

  There are also a number of different deductible options to consider when securing your professional liability policy. Typically, you’ll have to pay a deductible each time you file for a claim. However, most insurers will also offer an aggregate deductible. With this option, you’ll have to pay a capped deductible once annually – and it will cover all your claims, regardless of how many you file.

  Additionally, you can specify that you want a first dollar defense deductible option. It will make your deductible apply only to damages and not legal costs.

  Keep in mind that these options will make your professional liability more expensive.