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Professional liability insurance provides coverage for third-party claims of financial loss stemming from professional services. Criminal acts and other types of liability, such as bodily injury or property damage, are not covered. Review your policy for further details.

Professional liability insurance policies typically work on a claims-made basis. A claims-made professional insurance policy only provides coverage for claims that occur while the policy is in force. If a claim occurs after coverage has lapsed, even if the incident in question occurred while the policy was active, you will not have coverage. However, you can purchase tail coverage to extend your coverage.

In the event of a covered claim, your professional liability insurance policy will cover your legal costs, including your defense and any awards or settlements, up to the policy limit and according to the terms of the policy.

Professional liability insurance is appropriate for professionals in many industries, including accountants, tax preparers, architects, software developers, graphic designers, consultants, insurance brokers and real estate agents. If an error or oversight on your part could result in financial loss for your clients, you may benefit from professional liability insurance.

Professional liability insurance and general liability insurance provide coverage for different types of liability. While professional liability insurance covers claims involving economic loss stemming from professional services, general liability insurance provides coverage for claims of bodily injury or property damage stemming from business operations or occurring on your business premises.

If a customer loses revenue because a website designer delivered a substandard website, the resulting claim could be covered under professional liability insurance. If a client trips on a broken step and is injured while visiting your office, the resulting claim could be covered under general liability insurance.

Many professionals need both general liability insurance and professional liability insurance.

The cost for professional liability insurance varies significantly based on a few factors, including the size of your company, the industry, and the amount of coverage. A small business or sole proprietor will typically pay much less for professional liability insurance than a large corporation would. An insurance broker can help you compare your carrier options so you can find affordable professional liability insurance.

Professional liability insurance is not typically required under law, but some states may require coverage for certain types of professionals as part of their licensing requirements. For example, some states require professional liability insurance for real estate agents.

Beyond state requirements, you may be contractually obligated to carry coverage. Many clients, especially large clients, require their service providers to carry errors and omissions insurance because they want to ensure that any potential losses are covered. For example, E&O insurance for consultants may be required by the company hiring the consultant.

Even if you are not required to buy professional liability insurance, doing so may be a smart idea. Consider how you would handle a lawsuit without coverage – could you afford your legal costs?

Yes, professional liability insurance provides coverage for legal defense costs. This is a key part of coverage since legal costs can add up, even if the claims against you are unfounded.

Exactly how much coverage you have will depend on the terms of your policy and your limits. With many policies, coverage of defense costs reduces the policy limits available for awards or settlements. Keep this in mind when deciding on appropriate limits.