What is Professional Liability insurance coverage?
Professional liability insurance can help protect California business owners and their employees if they are held responsible for business mistakes or face accusations of negligence.
This insurance can help cover:
- Professional mistakes that causes financial harm to another person or business
- Accusations of professional negligence including inaction or wrongdoing
- Misrepresentation of your services
Professional liability insurance can help cover related costs in various situations, whether you actually made an error or a client claims that you did. For example:
- A client claims an architect in Los Angeles made an error in their designs that led to the collapse of a stairwell, and they sue them for causing injuries. Professional liability insurance can help the architect with legal defense costs if they need to defend their business.
- A San Francisco insurance agent forgets to remind a client to renew their auto insurance policy. After the policy expires, the client gets into a crash which causes significant damage. Professional liability insurance can help cover the costs resulting from the mistake.
What is the difference between Professional Liability and E&O insurance?
Professional liability insurance is sometimes known as errors and omissions insurance, or E&O.
The terms are often used interchangeably and usually provide the same coverage; it just depends on the industry. E&O is used primarily for real estate agents, property managers and insurance agents. There’s also a specific contractor’s E&O option for construction professionals.
Most other industries refer to this insurance as professional liability, including lawyers, accountants, architects and engineers.
Is Professional Liability insurance required in California?
Professional liability insurance is not required for most businesses in California. However, coverage may be required to comply with certain industry standards.
For instance, if you work on California state or local government contracts, you may be required to have professional liability coverage. Or, if you are a healthcare provider, your employer may require you to have malpractice insurance, a type of professional liability coverage.
Even when it’s not required, having professional liability insurance can be beneficial. California business owners often get this coverage for the following reasons:
California small businesses with professional liability coverage may be better protected financially if they make a professional mistake or are accused of negligence.
Clients may require a certificate of insurance before signing a contract to work with you, especially on high-cost projects. Without professional liability or E&O insurance, you may lose out on potential jobs.
Licenses and permits
Professional liability insurance could be required in the city where you work or for certain business licenses and certifications.
For example, mental health providers in Fresno County must have professional liability insurance with minimum coverage of $1 million per occurrence with a $3 million annual aggregate.1
What types of businesses might need Professional Liability in California?
Professional liability is common coverage for professional services, such as accountants, consultants and real estate professionals.
However, many industries can benefit from this type of California business insurance.
Many businesses run the risk of making a mistake that costs someone money or could potentially face accusations of negligence or wrongdoing. Professional liability insurance can help resolve these issues quickly so you can avoid customer confrontations and protect your reputation.
For example, if an accountant in San Diego is accused of making a mistake that caused a client to lose out on significant tax advantages, professional liability insurance could help cover related expenses to defend themselves.
Similarly, if a property manager accuses a San Jose painter of painting a building with the wrong color, contractor’s E&O insurance can help cover the costs to redo the job or defend against the accusation.
How much is Professional Liability insurance in California?
The cost of professional liability insurance can vary depending on a variety of factors, including:
- The type of work you do
- The number of employees you have
- The locations where you do business
- Your work experience
- Your insurance claims history
- How high you set your limits
NEXT makes it easy to get affordable California errors and omissions insurance or professional liability insurance online in about 10 minutes. Monthly premiums for this type of business insurance policy cost $45 or less for 52% of our U.S. customers.**
Learn more about professional liability insurance costs.
How NEXT Insurance helps California businesses
NEXT provides professional liability insurance policies for California small business owners and self-employed workers.
It only takes about 10 minutes to get a quote, review your coverage options, choose your policies and download a certificate of insurance.
Start an instant quote online today.
Our team of licensed insurance advisors is standing by to assist you if you have any questions along the way.