Do I need professional liability insurance?

Professional liability insurance can provide financial help if you or someone at your business is accused of making a professional mistake that cost someone else money.

by Marcia Layton Turner
updated May 11, 2023 ·  3min read

When many people think of insurance, what comes to mind first is property damage or an injury.

For example, car insurance can cover most or all of the costs that may result from getting into an accident. Depending on the level of insurance coverage you choose, your insurance company might pay for medical costs, damage to cars and property, and a rental vehicle while your car is being repaired.

Renters' insurance can cover the cost to replace your personal items damaged while you live in a rental property—just as homeowners' insurance can cover the cost of damage to your home after a storm or break-in.

Business insurance can help protect you from financial losses related to injuries or property damage. And it can also go the extra step of providing coverage related to the advice and services you provide.

This type of insurance is usually called professional liability insurance or errors and omissions coverage.

As a business owner, you have several options for insurance coverage, depending on your situation and industry.

What is professional liability insurance?

"Professional liability insurance covers individuals and businesses if they are found negligent in the professional services [they] provide, [or] if [they or their] employees cause a client financial harm due to mistakes made or failure to perform a service in an agreed-upon manner," says Walt Capell, president of Workers Compensation Shop.

Capell explains that professional liability insurance covers three main types of damage:

  • Negligence—failure to take care to prevent something bad from happening
  • Misrepresentation—providing misleading information
  • Violation of good faith and fair dealing—not being honest in your intentions or willingness to abide by an agreement

Who needs professional liability coverage?

Although professional liability insurance is a type of business coverage, not everyone may need it.

“Businesses that need this type of insurance coverage … provide professional services to customers," Capell says. This list includes accountants, architects, engineers, lawyers, consultants, counselors, insurance brokers, financial advisers, and real estate agents. Creative professionals—such as writers, graphic designers, and photographers—may want to consider it as well.

What types of liability insurance are available?

Professional liability insurance is just one of several types of business insurance. Depending on your business operations, it could be combined in an insurance package with other types of liability insurance to provide more protection, including:

General liability insurance

General liability is one of the most common types of business insurance. It can provide financial help if your business is involved in an accident that involves an injury to someone other than an employee or damage to property that you don’t own.

Commercial auto insurance

Similar to personal auto insurance, commercial auto insurance can provide liability protection if you are held responsible for an accident that involves injuries or property damage while you are driving for business reasons.

Employment practices liability insurance

This type of insurance can provide financial backup if you have employees and your business is accused of allowing discrimination, harassment, or wrongful termination.

Product liability insurance

Businesses that make, distribute, and sell products can get financial protection from product liability insurance if someone claims a product caused an injury or property damage.

How to get the professional liability coverage you need

Business owners have several options for finding professional liability insurance and other types of business insurance. 

Since we know this is a need for many of the business owners we work with, we partner with trusted insurance providers like NEXT Insurance so you can quickly review tailored and affordable options for your business online.  

Start a quote today to see options in less than 10 minutes.

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Marcia Layton Turner

About the Author

Marcia Layton Turner

​Marcia Layton Turner writes regularly about small business and real estate. Her work has appeared in Entrepreneur, Bu… Read more

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of the author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.