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Professional liability insurance covers claims that your advice or your work caused a client a financial loss. It is also sold as errors and omissions insurance. Accountants, consultants, designers, agents, and many other service providers carry it, and some clients require it before they sign a contract.
Your profession sets the starting price
Insurers group professions by how often clients sue and how large those claims get. Work that touches money, health, or property tends to sit in higher priced groups. Two firms with the same revenue can receive very different quotes because their work carries different risks. If you are unsure how this cover differs from general liability, our comparison of general liability and professional liability draws the line clearly: general liability deals with injury and property damage, professional liability deals with your work itself.
Revenue, staff, and claims history
Premiums scale with revenue because a larger practice has more client work that could be challenged. Insurers also ask about past claims and about complaints that might become claims. A clean record helps. A past claim does not make you uninsurable, though it will raise the price and may narrow your choice of insurers for a while.
Limits and the retroactive date
Most professional liability policies are written on a claims made basis. They respond to claims made while the policy is active, for work done after the retroactive date in the contract. Moving that date, or losing it when you switch insurers, can leave earlier work uninsured. Keep the original retroactive date when you change provider, and treat that date as part of the price comparison, not as fine print.
Deductibles and defense costs
Check whether defense costs sit inside your limit or on top of it. If legal fees eat into the limit, a long dispute can leave little cover for any settlement. A higher deductible lowers the premium, and it also means you fund the first part of every claim, including claims you win.
Fitting cover to client contracts
Clients often name a required limit in their contracts. Buy at least that level, and check whether your policy covers the services you actually sell today, not the services you sold when you first applied. As your work changes, tell your insurer. Pair this cover with the basics in how much general liability coverage you need and you have the two policies most service businesses rely on.
