Professional Liability Insurance: Everything You Need To Know

Professional liability insurance, also known as errors and omissions (E&O) insurance, can help protect you if you’re taken to court for professional negligence or breach of contract. In some states, this type of insurance is mandatory for small businesses in certain industries, and it may be beneficial for any business that provides specialized services or expertise rather than products.

Professional liability insurance covers your legal expenses if you are sued due to a failure in the performance of your professional duties, such as negligence or breach of contract.

Keep reading to learn everything you need to know about professional liability insurance for businesses, including what it covers and how much your business may have to pay for coverage.

Key Takeaways

If your business is sued for negligence, misrepresentation, breach of contract or a similar failure in the performance of your professional duties, professional liability insurance coverage can cover relevant legal fees.
Professional liability insurance coverage is most important for businesses that provide professional services instead of products, including doctors, lawyers, consultants, accountants, real estate agents and photographers.
Certain businesses may be required to purchase professional liability coverage, depending on the state they are based in.
Small businesses pay less than $100 a month on average for professional liability coverage from insurers like The Hartford and NEXT Insurance.

What Is Professional Liability Insurance?

Professional liability insurance is a type of commercial insurance that provides coverage if you are sued for failing to adequately carry out your professional responsibilities and causing your client to experience financial difficulty or another type of loss as a result.^[1]

Your professional liability insurance company can cover several types of legal expenses, such as attorney fees, administrative costs related to appearing in court, court-ordered payments to the plaintiff and out-of-court settlements.

Keep in mind that lawyer fees often range from as little as $3,000 to as much as $150,000, and you could have to pay this entire amount out of pocket if you don’t have professional liability coverage.^[1]

	Professional Liability Insurance
What Does it Cover?	Financial losses from lawsuits over professional errors, omissions or negligence
What Isn’t Covered?	Fraudulent or intentional losses, physical injuries or property damage and claims involving discrimination, abuse or sexual misconduct
Cost	Often less than $100 per month for small businesses, depending on your insurer and other factors

What Does Professional Liability Insurance Cover?

Professional liability insurance covers legal defense costs when a business is sued for errors or omissions, or for failing to deliver services as agreed.

Professional liability insurance may also cover lawsuits arising from allegations of defamation or copyright infringement.^[2] However, many insurance carriers instead cover these claims through general liability insurance, so you may need to double-check the details of your policy to confirm how these personal and advertising injury claims are covered.

Below are some of the main types of business insurance claims typically covered by a professional liability insurance policy.

Negligence

Professional liability insurance would cover you if your business were sued due to negligence in providing service, such as when you overlook an issue that leads to damages or injuries.

Misrepresentation

Professional liability coverage would protect you from a misrepresentation lawsuit if your business doesn’t accurately describe itself or its capabilities to clients.

Breach of Contract

Professional liability insurance would cover you if you were sued for breaking the terms of your contract with a client.

Errors and Omissions

Professional liability coverage would pay for legal costs if you make a professional mistake, even if it is unintentional.

Inaccurate Advice

Professional liability insurance would protect you from expenses if you are sued for offering incorrect advice to a client or customer, such as during consulting.

What Isn't Covered by Professional Liability Insurance?

Your professional liability insurance won’t cover fraudulent or intentional losses. In addition, it won’t cover lawsuits related to physical injury or damage to someone else’s property that occurs on the premises of your business because these are typically covered by general liability insurance. Finally, your professional liability insurance provider will generally exclude coverage for employment practices liability claims, as well as any claim involving discrimination, abuse or sexual misconduct.^[3]

How Does Professional Liability Insurance Work?

Professional liability insurance works by covering legal costs after a business is sued for failing to meet its professional obligations. Whether your insurer will cover a specific professional liability insurance coverage claim may depend on whether you have a claims-made or occurrence policy. Claims-made policies only cover claims that you file while your policy is active. Meanwhile, occurrence policies cover any losses that occur while your policy is active, even if you don’t file a claim until after your policy expires.^[4]

occurrence policy

Who Is Professional Liability Insurance Best For?

Professional liability insurance is best for businesses that provide professional services or advice rather than physical products. Examples of small businesses and individual professionals that may need this coverage type include the following:^[1][2][4]

Accountants
Advertising and marketing firms
Architects
Barbershops and hair salons
Doctors
Educators
Engineers
Financial advisers, career coaches and other consultants
Graphic designers
Insurance agents
Lawyers
Mental health counselors
Occupational therapists
Personal trainers
Pet groomers
Photographers
Printing and publishing companies
Real estate agents
Software developers
Veterinarians

Is Professional Liability Insurance Required?

You could be required by law to carry professional liability insurance depending on your industry and the state you operate in. For example, real estate agents are required to purchase E&O coverage to be licensed in the following states:^[5]

Alaska	Louisiana	North Dakota
Colorado	Mississippi	Rhode Island
Idaho	Montana	South Dakota
Iowa	Nebraska	Tennessee
Kentucky	New Mexico	Wyoming

Who Needs Professional Liability Insurance?

You may be required to purchase professional liability insurance due to state law or federal regulations, depending on your industry. Additionally, this coverage may be necessary as part of a contract with a client to ensure you can cover damages should you make a mistake, error or break the contract.^[6] However, most businesses should strongly consider professional liability coverage to protect themselves against financial fallout if they are sued for issues such as negligence, misrepresentation, or providing inaccurate advice to a client.

Professional Liability Examples

Below are a few examples of potential professional liability claims that would typically be covered by E&O insurance:

E&O insurance could cover a doctor who fails to review a patient’s allergies in the medical chart and prescribes a medication to which the patient is allergic.
Professional liability insurance could cover legal expenses if a personal injury lawyer falsely claims to have experience as a criminal defense attorney and their client loses the case and is sentenced to jail.
If a marketing firm becomes the exclusive partner of an entertainment company but breaches the terms of the contract by failing to actually produce and distribute advertisements and merchandise for the entertainment company, E&O coverage could protect you from related lawsuit expenses.
E&O coverage would cover legal costs if an architect made a mistake in designing the foundation of a new building, causing a portion of the building to collapse shortly after construction and resulting in a lawsuit.
Professional liability coverage would apply to a compliance consultant who provides a technology company with incorrect information about consumer privacy laws in the company's state, resulting in the company being sued by the state government.

Professional Liability Insurance vs. General Liability Insurance

Below is a breakdown of the differences between professional liability and general liability insurance:^[7]

	General Liability	Professional Liability
Purpose	Covers physical injury or property damage	Covers financial loss due to an error, omission or professional negligence
Types of Claims	Damage to someone’s property or injuries from a slip and fall	Incorrect advice, breach of contract or missed deadlines
Common Industries	Retail, manufacturing, restaurants, construction and real estate	Accountants, architects, business consultants and medical professionals
Covers Third-Party Injuries/Damage	Yes	No
Covers Errors and Omissions	No	Yes

How Much Does Professional Liability Insurance Cost?

Professional liability insurance costs will vary based on several factors, including your insurance company. For example, small businesses with policies at The Hartford pay an average monthly premium of $76.^[8] Alternatively, about 73% of NEXT Insurance customers pay $45 or less for their E&O coverage.^[9]

Other factors that will impact your E&O insurance premiums include:^[8]

Your industry
Location
Coverage limits
Deductible
Size
Years in business
Claims history

Professional Liability Insurance at a Glance

Professional liability insurance is also referred to as errors and omissions (E&O) insurance.
Professional liability coverage can reimburse you for losses after your business is sued for making an error, omitting essential information or breaking the terms of a contract.
While typically not required by law, some state or federal regulations may require your business to purchase professional liability insurance, depending on your industry.
Personal liability insurance can cost less than $100 per month, depending on the insurer, your business’s industry, your coverage limits and other factors.

How To Get Professional Liability Insurance

You’ll want to compare professional liability insurance quotes from at least three to five different commercial insurance companies to find the best possible deal on the coverage your business needs. When you request quotes, you’ll need to share information such as your industry, location, annual revenue and number of employees.

While it can take a while to reach out to several insurers individually, SmartFinancial makes comparison shopping quick and simple. Once you fill out our online questionnaire, we’ll get to work on finding the best commercial insurance policies for your circumstances. Click here to start comparing business insurance quotes at no cost today.

Save by Comparing! Get Your Free Commercial Insurance Quotes Now!

FAQs

How long does a professional liability policy last?

Professional liability insurance policies typically last for one year, after which you should be able to renew your coverage. Some insurers may offer multi-year policies, locking in your premium cost for up to three years of coverage.^[10]

Does professional liability insurance cover lawsuits?

Professional liability insurance can cover expenses from certain types of lawsuits, such as those related to errors, omissions and breaches of contract.^[1] However, it won’t cover all types of lawsuits, such as those involving discrimination, abuse or sexual misconduct.^[3]

Is professional liability insurance the same as errors and omissions insurance?

Yes. Professional liability insurance is another term for errors and omissions (E&O) insurance.^[1]

Can my small business get professional liability insurance?

Yes. Small businesses can purchase professional liability insurance coverage.

What types of professional liability insurance are there?

Several different types of professional liability insurance exist, including design-build insurance for architects and engineers, medical malpractice insurance for medical professionals, media liability insurance for media publishers and technology E&O insurance for technology service providers.^[10]

Sources

The Hartford. “Errors and Omissions (E&O) Insurance.” Accessed March 16, 2026.
GEICO “Professional Liability Insurance.” Accessed March 16, 2026.
CPH Insurance. “5 Exclusions on Professional Liability Insurance Policies.” Accessed March 16, 2026.
Insurance Information Institute. “Professional Liability Insurance.” Accessed March 16, 2026.
Rice Insurance Services Center. “State Coverage.” Accessed March 16, 2026.
The Hartford. “Who Needs Professional Liability Insurance?” Accessed March 16, 2026.
NEXT Insurance. “General Liability vs. Professional Liability.” Accessed March 17, 2026.
The Hartford. “Professional Liability Insurance Cost.” Accessed March 16, 2026.
NEXT Insurance. “What Does (E&O) Professional Liability Insurance Cost?” Accessed March 16, 2026.
Insurance Training Center. “Professional Liability Insurance Explained.” Accessed March 16, 2026.

Professional Liability Insurance: Coverage, Costs and Requirements Explained

Preston Micalizio

Richard Murphy

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