Professional liability insurance, or errors and omissions (E&O) coverage, offers protection if your company is blamed for an oversight or fails to complete a project that results in the client losing money.
Professional liability insurance is different for each profession since different businesses have unique risks. For example, you might be:
There are two core areas where errors and omissions insurance can protect you from unexpected costs:
Your business mistakes
You can follow all the rules and do everything right and still make some mistakes. Professional liability insurance can help protect you from out-of-pocket costs until you reach your policy limit if you or your employees are accused of making a mistake that causes financial harm to another person or business.
Example: You’re a real estate agent and the owner of a property claims that you made repeated mistakes on the paperwork for transactions between tenants that cost them $50,000. The property owner sues you to get reimbursed. Your professional liability coverage would cover some expenses up to the policy limit.
Accusations of professional negligence
You’re expected to act in the best interest of your clients when you provide professional advice or service, which is known as “duty of care.” But you might find yourself accused of professional negligence and forced to defend yourself if your business actions caused financial loss for a client.
Example: You’re an accountant and your client sues you for making a mistake in your paperwork that led to them losing out on significant tax advantages and paying more than they had to. The client could have grounds for legal action against you. Your professional liability policy would cover related expenses up to the limits of your policy, including your lawyer and legal fees and judgments if you are ruled liable for your client’s losses.
While professional liability insurance a variety of situations, most policies will not cover:
False advertising: Professional liability won’t cover you If your marketing materials inadvertently contain misleading information about your product or services and you’re sued for false advertising. For a situation like this, you’ll want general liability insurance.
Property damage or personal injury: Unfortunately, job skills and experience don’t always save people from bad luck. If you drop something that accidentally causes injury or damage to customers, passers-by or property, you’ll want to be covered by general liability.
Employee injuries: If something happens to an employee on the job, workers’ compensation is the protection you’ll need. It can also help cover your medical expenses and lost wages if you are hurt on the job.
Car accidents: If you use a company vehicle and get into an accident, commercial auto insurance can help cover expenses. Add hired and non-owned auto insurance if you use rented vehicles or employees occasionally use personal vehicles for work..
Intentional wrongdoing & illegal activity: If you or one of your employees takes a shortcut that results in damage, neglects to comply with regulations or intentionally engages in bad behavior, you’re out of luck and will most likely need to pay for any related costs out of pocket.
We offer an easy way for small business owners and self-employed professionals to get business insurance online. In just a few minutes, you can get a quote, purchase coverage and share your certificate of insurance.
Our team of licensed, U.S.-based advisors is here to help if you have any questions.