If you provide professional services or advice, a client can sue you for financial losses they claim resulted from your work — even if you did nothing wrong. Professional liability insurance (also called Errors and Omissions or E&O insurance) covers your legal defense and any settlements.
Professional Liability Insurance (E&O): What It Is and Who Needs It
Source: Concerning Reality
What Professional Liability Insurance Covers
- Negligence claims: A client claims your advice or work was negligent and caused them financial harm
- Errors and omissions: Mistakes or oversights in your professional work
- Misrepresentation: Claims that you misrepresented your services or qualifications
- Breach of contract: Claims that you failed to deliver what was promised
- Legal defense costs: Attorney fees, court costs, expert witnesses — even for frivolous claims
NOT covered: Intentional wrongdoing, criminal acts, bodily injury/property damage (covered by GL), employee claims (covered by EPLI)
Who Needs Professional Liability Insurance
Any professional who provides advice, services, or expertise for a fee should have E&O coverage:
- Consultants and management advisors
- Accountants and financial advisors
- Lawyers (malpractice insurance)
- Doctors and healthcare providers (medical malpractice)
- Architects and engineers
- IT professionals and software developers
- Real estate agents and brokers
- Marketing and PR professionals
- Insurance agents and brokers
Professional Liability vs. General Liability
- General liability: Covers physical harm — someone trips in your office, you damage a client's property
- Professional liability: Covers financial harm from your professional work — bad advice, missed deadlines, errors in deliverables
Most professional service businesses need both. A BOP covers GL; professional liability must be added separately.
What Professional Liability Insurance Costs
- Consultants/IT: $500–$1,500/year
- Accountants: $800–$2,500/year
- Real estate agents: $500–$1,500/year
- Architects/engineers: $1,500–$5,000/year
- Healthcare (malpractice): $5,000–$50,000+/year depending on specialty
Claims-Made vs. Occurrence Policies
Most professional liability policies are claims-made — they cover claims filed while the policy is active, regardless of when the incident occurred. This means:
- You need continuous coverage — gaps leave you exposed
- When you retire or close your business, you need tail coverage (extended reporting period) to cover future claims from past work
Occurrence policies (less common for E&O) cover incidents that occurred during the policy period, regardless of when the claim is filed.
