Professional Liability Insurance for Small Businesses

Lawsuits happen. Protect your business with professional liability insurance.

You are amazing at what you do. You offer your clients expertise, experience, and the right advice to help them achieve big things in their life or business.


But no matter how good you are, mistakes can happen. It doesn’t matter if it was a significant mistake, a small one, or even if it’s a perceived mistake – the costs can be devastating.  With professional liability insurance from InsureGood you can minimize this risk so you can focus on building your dream – not defending it.

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Professional Liability Insurance for Small Businesses

Lawsuits happen. Protect your business with professional liability insurance.

What is Professional Liability Insurance?

Lawsuits happen. From consultants to home care and hospice businesses, professional liability insurance can be tailored to meet your specific business risks and should be considered in your overall insurance program.

We’ll help you determine what you need and present you with options to address your risks and budget. Whether you’re starting a business or scaling an established one – we’ve got the right expertise to help you lower your risk and improve your bottom line.

Professional liability insurance provides coverage for financial damages arising from rendering or failure to render professional services. It helps to protect you and your business from claims not covered by commercial general liability coverage, such as erroneous advice or a perceived failure to deliver the services agreed to in your client contract. For example, suppose your client sues your business for mistakes related to your service. In that case, a professional liability policy may help you cover the legal defense costs and damages that you may be ordered to pay because of your negligence.

Professional liability insurance also referred to as errors and omissions insurance, (or in the medical field) malpractice insurance protects professional personnel against negligence claims made by their patients or clients.

36 to 53% of small businesses are sued in a given year. If you find yourself in this situation, regardless of whether you made a mistake, you will need to finance the legal costs associated with the lawsuit. Professional liability insurance can help you avoid financial disaster with coverage for the legal defenses and damages should there be any.

Some of the professionals who commonly leverage this type of liability insurance for coverage include:


  • Home care and hospice providers
  • Management consultants
  • Lawyers
  • Physicians
  • Financial services professionals
  • Accountants
  • Architects
  • Project managers
  • Marketing professionals
  • Life/career coaches
  • Real estate brokers
A managment consultant shaking hands with a client after purchasing professional liability insurance.

Does My Business Need Professional Liability Insurance?

If you are offering advice or providing services to your clients, you likely need professional liability insurance.

The need for professional liability coverage developed because typical general liability insurance policies only respond to bodily injury, property damage, personal injury, or an advertising injury claim. Professionals such as home care aides, management consultants, accountants, financial services professionals, technology consultants, and others can experience claims that don’t fall under general liability; as a result, additional coverage is needed to fill this gap.

Common claims made on these policies include negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice. For example, if a technology consultant fails to install the software correctly, it would not cause bodily injury, property damage, or advertising injuries. Therefore, general liability insurance would not cover the claim. The incorrectly performing software could directly cause financial losses and may be attributed to a misrepresentation of the technology consultant’s capabilities, the professional liability coverage would be triggered.

When deciding if your business needs professional liability insurance, keep in mind that when a small business lawsuit goes to trial, it can cost anywhere from $3,000 to $150,000 to resolve. Without professional liability insurance, you would need to maintain enough cash in your operating account to cover these costs out of pocket. In addition, the risks of lawsuits grow as your business, the number of employees and the number of clients rise – requiring you to continue to increase the money you have in reserve to cover the potential costs.

You may also be required to have professional liability in place to land larger projects – particularly government or municipal contracts. These types of projects often require proof (called a certificate of insurance) of your professional liability insurance before they allow you to begin your engagement with them. We make this easy at InsureGood. Once your professional liability insurance is in place, you’ll have access to your certificate of insurance anytime in our client portal.

Regardless of whether it’s required, we strongly recommend that you secure professional liability insurance to protect you and your business from potentially catastrophic lawsuits that may prevent your business from reaching its full potential.

What Does Professional Liability Insurance Cover?

Professional liability insurance provides coverage for client claims that your service or advice caused them financial harm.

The following coverages are typically included in professional liability insurance:

  • Mistakes, negligence, or alleged negligence – services provided or not provided by your company that result in client damages
  • Defense costs – Legal defense costs associated with lawsuits against your company (regardless of fault)
  • Personal injury – claims of liable or slander, whether they’re true or not
  • Copyright infringement – Copywrite law issues, mistakes, oversights, and misunderstandings
  • Previously performed services – protection for current and previous work completed (for an agreed-upon timeframe).
  • Temporary staff and independent contractors – work performed by your employees, including temporary staff and independent contractors

The following are typically not included in professional liability coverage:

  • Bodily injuries to others
  • Cost of damaged property
  • Medical expenses associated with bodily injuries to others

General liability insurance can be added to your insurance program to address the above risks and minimize gaps in coverage.

What Types and How Much Professional Liability Coverage Does My Business Need?

An image of hangs holding gears demonstrating how different types of Connecticut professional liability policies work.

The amount and specific types of professional liability insurance coverages that you may need will depend on the size and complexity of your business. Its challenging to say for sure what you need without knowing more about your business. To ensure you’re adequately covered, we advise that you work with a licensed, independent insurance agent such as InsureGood.

These general considerations will help you understand some of the elements you may want to consider:

    • Are there any tasks, activities, or services that you normally perform that the policy doesn’t cover? Look at the list of exclusions and review it to ensure it does not preclude coverage for any professional services or tasks you need coverage for. InsureGood can help you determine if all your professional tasks would be covered or if additional clauses would need to be added.
    • Is there an extended reporting period option? This would offer additional time to report claims that would typically fall outside the policy period—as long as the act driving the claim occurred during the policy period. Find out what extended reporting period options are available if needed.
    • Can the policy be customized or modified? Can extensions be added? Typical additional coverage includes disciplinary proceedings or reduced retentions and may be of importance to your business.
    • Have there been any past issues or activities at your business that could potentially result in a claim? Have there been past claims? What was the result? Discussing these specifics with an Agent can help determine what coverage specifications you need now to prepare you for the future.
    • Are there specific insurance limits that clients require you to have? For example, many clients will want to see proof you have $1,000,000 of professional liability insurance.

Is Professional Liability Policy Required by Law?

Professional Liability Insurance is not required by law. Still, we strongly recommend that small business owners who provide advice or services such as home care agencies, consultants, accountants, and others have this coverage in place.

Many of your clients and vendors will likely require you to have professional liability insurance in place as a condition to begin work with them. More extensive projects and government or municipality contracts will almost definitely require this coverage.

How do I Lower My Professional Liability Premiums

(and the Risk of My Business Being Sued)?

Some professional liability claims are unavoidable, but there are things that you can do to lower the likelihood of a lawsuit or being found liable if you are sued. By putting the right operational processes and policies in place, you can avoid high out-of-pocket costs and lower your insurance premiums.
Here are some suggestions:

  • Always have a signed and dated contract in place before beginning your work with a client, be sure to have a defined scope of work, and obtain approval for each phase of your engagement
  • Meet deadlines and communicate with clients regularly
  • Establish a documented, high standard for product and service quality control at your organization
  • Keep all company records up-to-date and accurate
  • Train employees thoroughly and properly

You don’t have to complete all of this on your own. Our InsureGood Business Risk Advisors can work with you to design and implement a risk management program to help you reduce your professional liability risks and lower your premiums, all while increasing your client’s satisfaction.

Your Professional Liability is Likely Tax-Deductible

Good news! If you’re operating a for-profit business, business expenses, including professional liability insurance, can be deducted from your taxes as long as they are both ordinary and necessary. If the insurance policies are common and necessary for your business, you can write off the total amount.

There are Cash-flow Friendly Ways To Pay For Your Professional Liability Policy

Depending on your business and cash-flow needs, you can leverage one of several options to pay your professional liability insurance premiums. Working with InsureGood, you can set up monthly, quarterly, or full-year payments to be paid through your company credit card or even finance your premium if it’s above certain thresholds.

Professional Liability Insurance Frequently Asked Questions

How much does professional liability insurance cost?

The average cost of professional liability insurance in America is $750 annually. However, the cost for your individual professional liability insurance is determined by several different factors including:

  • Your industry – in general, higher risk industries tend to have higher premiums to the risk
  • Coverage limits – the higher the amounts of insurance you buy the more premium will be
  • The size of your business – the larger your organization and your team’s size the larger your potential for a loss which increases the premium
  • Experience – as the amount of time you’ve been in business and your experience increases successfully, your premiums will likely decrease
  • Location – where you’re located can increase your premiums if there are higher loss rates in your area

Learn more about the cost of professional liability here.


    Is professional liability the same as malpractice insurance?

    Malpractice insurance is a specialized type of professional liability insurance for legal and medical professionals and addresses the unique liability risks they face. All professional liability insurance policies help you cover the costs associated with making a mistake (or a perceived mistake) as you provide professional services. If a client sues you over a perceived mistake, professional liability will help you pay for legal defenses as well as damages if found liable. 

    Is professional liability the same as errors and omissions?

    Errors and omissions insurance and professional liability both protect you from the financial burden of lawsuits caused by unsatisfactory work. Depending on the industry you’re in, professional liability may be referred to as errors and omissions. 

    What’s the difference between professional liability and general liability?

    Professional liability covers risks associated with the rendering (or failure to render) of professional services such as errors, omissions, and failure to uphold promises. General liability covers risks associated with bodily injury, property damage, and advertising injuries such as slander.  When combined, the two policies provide broad coverage that protects you from many of the common risks a small business faces. 

    How do I purchase professional liability insurance?

    Professional liability can be purchased as a single policy or as part of a commercial package policy where you bundle together most of your insurance coverages. To purchase a professional liability policy you will need to complete a short application that provides the details of your business. Working with InsureGood, you will then determine the appropriate levels of coverage and specific coverages you may need to adequately cover your business. For straightforward risks, the entire process shouldn’t take more than 30 minutes of your time in total to obtain a professional liability policy. 

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