Running a business means delivering high-quality services and maintaining strong client relationships. But even with the best intentions, misunderstandings, missed deadlines, or simple mistakes can happen. In industries where expertise and professional advice are key, a single error could lead to a dissatisfied client—or worse, a costly lawsuit.
According to the American Medical Association, 31.2% of physicians reported being sued at some point in their careers. This trend isn't limited to healthcare—professionals across various industries face similar legal risks.
To safeguard against these challenges, more businesses are turning to professional liability insurance as a critical layer of protection. Whether you're a consultant, financial advisor, or healthcare provider, this coverage helps protect both your reputation and finances from unexpected lawsuits.
Many business owners assume professional liability insurance is expensive, but the reality is that the cost of a lawsuit far exceeds the price of coverage.
In this post, we’ll break down everything you need to know about professional liability insurance—what it is, who needs it, what it covers (and doesn't cover), how it works, and how much it costs.
What is Professional Liability Insurance?
Professional liability insurance protects businesses that offer services or advice from lawsuits related to errors, negligence, or failure to meet client expectations.
It is also known as errors and omissions (E&O) insurance, and in the medical field, it is called medical malpractice insurance.
If a client sues your business over a professional mistake—whether justified or not—this policy helps cover legal defense costs, settlements, and court-ordered judgments, so you don't have to pay out-of-pocket.
How is Professional Liability Insurance Different?
- General liability insurance: Covers bodily injuries, property damage, and advertising-related claims (e.g., a customer slipping in your office).
- Professional liability insurance: Covers financial losses from service-related mistakes, negligence, or contract disputes (e.g., an accountant making an error in a client’s financial report).
While both general liability and professional liability insurance protect businesses from financial risks, having the right combination of coverage is essential to ensure complete protection. At TWFG Khan Insurance, we help you assess your risks and build a coverage plan that fits your industry and business needs.
Whether you need protection against client lawsuits over professional mistakes or claims for bodily injury or property damage, our team works with top-rated carriers to provide customized, cost-effective coverage.
Who Needs Professional Liability Insurance?
Any business that provides services, offers advice, or makes professional recommendations can face lawsuits from clients. Here are the businesses that need professional liability insurance:
- Consultants: Covers claims of bad advice, incorrect projections, or missed deadlines that lead to financial loss.
- Accountants and CPAs: Protects against calculation errors, tax filing mistakes, or lost financial records that could cause client losses.
- Architects and engineers: Helps cover legal fees if a design flaw, structural miscalculation, or missed deadline leads to financial damages.
- IT and technology professionals: Provides protection when software bugs, security breaches, or system failures result in client losses.
- Healthcare professionals: Covers claims related to misdiagnoses, treatment errors, or medical negligence.
- Real estate agents and brokers: Helps in cases where a client sues over misrepresentation, contract disputes, or incorrect property valuations.
- Marketing and advertising agencies: Protects against copyright infringement, false advertising claims, or errors in campaign execution.
- Legal professionals: Covers lawsuits related to misrepresentation, contract disputes, or mistakes in legal advice.
Some industries and clients require professional liability insurance before signing contracts, while many state laws mandate coverage for professionals like doctors, lawyers, and accountants. If your business falls into one of these categories, having the right coverage isn't just a smart decision—it's a necessity.
At TWFG Khan Insurance, we help you navigate these requirements by providing tailored professional liability coverage that meets industry standards and legal mandates. Whether you’re a consultant, accountant, healthcare provider, or IT professional, we work with top-rated insurance carriers to ensure you have the right protection against claims of negligence, errors, or contract disputes.
Our team makes it easy to secure coverage that aligns with your business needs—so you can focus on delivering expert services with confidence.
The Cost of Professional Liability Insurance
Professional liability insurance costs vary based on your industry, business size, and coverage needs. While some businesses may pay as little as $50 per month, others in high-risk professions like healthcare or legal services may pay significantly more.
Understanding the average cost and the factors affecting pricing can help you choose the right coverage for your business.
Average Cost Estimates
The average monthly cost of professional liability insurance for small businesses typically falls within these ranges:
- Low-risk industries (e.g., consultants, graphic designers): $50 – $100 per month
- Moderate-risk industries (e.g., accountants, IT professionals): $100 – $200 per month
- High-risk industries (e.g., healthcare, engineering, legal services): $200 – $500+ per month
Aspects That Impact the Cost of Professional Liability Insurance
- Industry and risk level: Businesses in high-risk fields, such as medicine, law, and financial services, typically pay high premiums due to the potential for costly lawsuits.
- Business size and revenue: Larger businesses with more employees and higher revenue often face greater exposure to lawsuits, increasing insurance costs.
- Claims history: A history of past lawsuits or insurance claims can make your business riskier to insure, leading to higher premiums.
- Coverage limits and deductibles: Higher coverage limits offer more protection but come with higher costs, while selecting a higher deductible can reduce monthly premiums.
- Location: Insurance rates differ by state and city due to differences in regulations, litigation trends, and the cost of legal defense in each area.
- Policy type: Some policies include retroactive coverage or extended reporting periods, which can increase costs but provide broader protection.
While price is important, choosing the cheapest policy can expose your business to coverage gaps. Instead of focusing only on cost, consider your level of risk and the protection your business truly needs.
What Professional Liability Insurance Covers
Providing professional services comes with risks, and even a tiny mistake—whether intentional or not—can lead to a lawsuit. This coverage ensures that one mistake or client dispute doesn't put your business at financial risk.
Professional liability insurance helps cover the expenses associated with the following key areas:
- Negligence: This insurance covers claims that your business’s services or professional advice failed to meet industry standards, resulting in financial losses for a client.
- Errors and omissions: Protects your business when a mistake, oversight, or failure to deliver a promised service leads to client losses.
- Breach of contract: Provides coverage if a client claims that you failed to meet the terms of an agreement.
- Misrepresentation: Covers situations where a client alleges that your business provided misleading or incorrect information, leading to financial damages.
- Missed deadlines: Helps protect your business if delays in your work result in financial losses for a client.
- Defamation (libel and slander): Covers legal expenses if a competitor or client accuses you of making false or damaging statements about them.
- Copyright infringement: Protects against claims that your business used someone else's intellectual property, such as a logo, design, or written content, without permission.
- Legal defense costs: Pays for attorney fees, settlements, and court-ordered judgments, even if the lawsuit is unfounded.
What Professional Liability Insurance Doesn't Cover
While professional liability insurance provides essential protection for businesses offering services and advice, it does not cover every type of risk. Understanding its limitations helps you determine whether additional coverage is necessary. The common exclusions from professional liability insurance are:
- Bodily injury and property damage: The insurance does not cover physical or property damage claims. General liability insurance covers these risks.
- Employee injuries: Does not pay for medical costs or lost wages if an employee gets wounded at work. Workers' compensation insurance provides this coverage.
- Employment-related lawsuits: This insurance does not cover claims related to harassment, discrimination, wrongful termination, or workplace disputes. Employment practices liability insurance (EPLI) is needed for these claims.
- Intentional wrongdoing or fraud: Professional liability insurance does not protect businesses involved in illegal activities, fraudulent practices, or deliberate deception.
- False advertising and defamation by employees: The insurance does not cover cases where employees make false claims, deceptive marketing statements, or defamatory remarks.
- Cybersecurity breaches and data loss: This insurance does not provide protection if a client’s sensitive data is stolen or compromised due to a cyberattack. Cyber liability insurance is required for this coverage.
- Product-related claims: The professional liability insurance does not cover injuries or damages caused by a defective product. It gives protection for businesses that manufacture, distribute, or sell physical products.
At TWFG Khan Insurance, we understand that one policy isn't always enough to fully protect your business. While professional liability insurance covers claims linked to errors and negligence, other risks—like bodily injuries, cyber threats, or employee disputes—require additional coverage.
That’s why we help businesses bundle professional liability insurance with general liability, cyber liability, and workers' compensation insurance. Our team operates closely with you to pinpoint potential risks and customize a comprehensive coverage plan that protects your business from every angle.
Don't leave gaps in your coverage—let TWFG Khan Insurance help you build the right insurance plan for your business.
How Professional Liability Insurance Works
Having professional liability insurance is only effective if you understand how it works. Unlike other types of business insurance, this policy works on a claims-made basis, meaning it only covers claims filed while the policy is active—regardless of when the incident occurred.
Additionally, key terms like retroactive dates and extended reporting periods determine whether past services or expired policies still offer protection. Failing to maintain continuous coverage could leave your business vulnerable to costly lawsuits.
Key aspects of how professional liability insurance works:
- Claims-made coverage: Covers only claims filed while the policy is active. If a claim is made after the policy expires, it won't be covered—even if the issue happened during the coverage period.
- Retroactive date: Ensures coverage for incidents that happened before the policy was purchased, as long as the claim is filed during the policy's active period.
- Extended reporting period: Allows you to file claims after the policy ends for incidents that occurred while it was still active. This is useful if a client takes months or years to file a claim.
- Legal defense coverage: Pays for attorney fees, court costs, and settlements if a lawsuit is filed against your business, even if the claim is unfounded.
- Customizable policy limits: Offers different levels of coverage, meaning businesses can choose a policy that aligns with their risk level and budget.
Affordable Professional Liability Insurance Without Compromising Coverage
Protecting your business from legal claims isn't just about compliance—it's about securing your reputation and financial stability. At TWFG Khan Insurance, we provide cost-effective, customized coverage that shields your business from the financial impact of professional errors, negligence claims, and contract disputes.
By working with top-rated insurance carriers, we ensure you get comprehensive protection at competitive rates, so you don't have to overpay for the coverage you need.
Here’s why businesses choose TWFG Khan Insurance:
- Industry expertise: We have years of experience helping businesses across various industries secure the right professional liability coverage. Whether you’re a consultant, accountant, healthcare provider, or IT professional, we understand the specific risks your industry faces and provide policies that protect you from potential lawsuits.
- Comprehensive coverage options: Our policies cover service errors, negligence claims, breach of contract, and legal defense costs. Even if a lawsuit is baseless, legal expenses can be overwhelming—our coverage ensures you don't have to pay out of pocket.
- Bundled protection: We offer custom insurance packages that go beyond professional liability insurance. Many businesses combine coverage with general liability, cyber liability, and workers’ compensation insurance for complete protection against all possible risks.
- Personalized support: Every business has different needs, and we take the time to understand yours. Our team works with you one-on-one to evaluate your risks, explain your coverage options, and find the best policy at a competitive rate. We handle the complexities of insurance so you can confidently focus on growing your business.
- Claims assistance and fast payouts: If a claim arises, we ensure you get the support you need quickly and efficiently. Our claims specialists guide you through the process, helping you minimize disruptions to your business while working to resolve issues as smoothly as possible.
Whether you run a small consulting firm, a healthcare practice, or a financial advisory business, we tailor policies to fit your specific industry risks. Don’t let legal expenses drain your business—get a quote with us today and protect what you’ve built.
