You work hard to build trust with clients in your small business. But imagine the day someone claims you made a professional mistake. It can happen to anyone, even if you’ve got years of experience to your name.
Professional liability insurance is the coverage that lets you focus on your craft — without second-guessing your services. If you’re wondering whether you really need it (or if it’s just another expense), chances are you do!
Key Takeaway
If your professional services have the potential to harm another person, you need professional liability insurance.
What Professional Liability Insurance Actually Protects You From
Professional liability insurance: Covers professional mistakes, “bad” advice, or unmet expectations
Think of professional liability insurance as coverage for your work. If a client pays for your service and claims you didn’t do it right, your business can be financially protected. Everyone makes mistakes, and this coverage means one mistake won’t undo your entire career.
Professional liability insurance is designed to protect you if:
- You miss a contract deadline
- Your recommendation backfires
- A client says your work was negligent
- Your advice causes a client to lose money
- Your client claims you failed to deliver
Of course, you always hope to do a rave-worthy job, but with this coverage, you have a safety net for all the what-ifs.
Professional Liability Insurance: Quick Facts
✔️It’s also known as “errors and omissions” insurance (or E&O insurance) because it covers mistakes or things left undone
✔️The difference between professional liability vs general liability insurance is that the former protects your work, and the latter covers general accidents unrelated to your expertise that happen at your business
✔️Professional liability insurance covers the costs to defend you in a lawsuit, plus settlement fees or damages awarded if you’re found liable
✔️It’s an essential type of small business insurance for anyone who offers expert-based services to clients
So, why is professional liability insurance important? The bottom line: It gives you peace of mind to do what you love, knowing you have a safety net just in case someone says you made a mistake.
Who Needs Professional Liability Insurance?
Any small business owner who provides services or advice based on their expertise needs professional liability insurance. If people pay you because you’re a professional, you need this coverage. It’s in the name!
Here are a few industries for which professional liability coverage is crucial, but remember: Every small business can benefit from this protection.
Consultants and Coaches
You share your expertise to help others succeed, but sometimes your advice becomes a liability. If a client believes your recommendation or report led to a loss, they may take legal action against you to get back what they feel is “owed” to them.
Even if you’ve done your due diligence, your consulting services can be affected by factors beyond your control. Defending yourself against a litigious client can take a devastating financial toll on your business, but professional liability insurance provides the support you need.
Example: A marketing consultant suggests a client invest in an influencer partnership. It ends up backfiring due to a resurfaced social media snafu, and the client blames the consultant for lost sales.
Consultants who need professional liability coverage include:
- Business Consultants
- Education Consultants
- HR Consultants
- Interior Designers
- Lactation Consultants
- Management Consultants
- Marketing Consultants
- Recruiters and Headhunters
- Sales Consultants
- Career Coaches
Educators
When it comes to teaching, tutoring, or mentoring, there’s a lot on the line. If a student or parent is dissatisfied with your education services, their claim can damage your reputation and, ultimately, your business. No matter how careful you are, there’s always a risk of your words or materials being misinterpreted or not producing a student’s desired results.
With professional liability insurance, you’re protected if you make a teaching mistake, whether real or perceived.
Example: A private tutor is accused of failing to adequately prepare a student for an entrance exam. The student’s parent demands a refund for their payment and threatens to sue.
Educators who need professional liability insurance include:
Financial Services
Whether it’s a decimal point rounded off incorrectly or a folder of invoices suddenly corrupted on your computer, you know how seriously errors impact your clients’ businesses. Every financial service professional needs professional liability insurance to protect against the risk of mistakes.
Even if an issue is a simple misunderstanding, your reputation is still on the line. With the right coverage, you can reassure your clients that you’re prepared to handle the situation like a pro.
Example: An accountant misses a filing deadline, and the client gets fined. Even if it’s a shared mistake, the blame usually lands on the professional.
Financial service providers who need professional liability insurance include:
- Accounting Services
- Actuary Services
- Auditors
- Billing Services
- Bookkeeping
- Financial Auditing
- Financial Planning
- Investment Advice
- Medical Billing
- Mortgage Brokering
- Tax Preparation Services
Photographers
You capture once-in-a-lifetime moments, but creative work is subjective. Sometimes, a client’s idea of the perfect photos or videos doesn’t align with yours. A client can claim that your images don’t meet their expectations, even after you’ve shot and edited them beautifully.
If you face a dissatisfied client or are unable to deliver on your contract, professional liability insurance can kick in to protect your business and make things right.
Example: A wedding photographer’s camera malfunctions, and key moments are lost. The couple sues for emotional distress and breach of contract.
Photography businesses that need professional liability insurance include:
Fitness and Health Professionals
From overexertion injuries to faulty gym equipment, providing fitness services carries inherent risk. Your workout plans and recommendations directly affect your clients’ physical well-being, and no matter how careful you are, it’s easy for a client to misunderstand directions or become frustrated with their results.
Professional liability insurance is the final layer of protection for your fitness services in case they accidentally cause injury, property damage, or if they don’t meet client expectations.
Example: A personal trainer creates a workout plan that exacerbates a client’s existing injury. The client sues for the costs of their medical care and rehabilitation.
Fitness professionals who need professional liability insurance include:
Pet Care Professionals
When it comes to furry family members, clients expect the highest level of care. But as a pet care professional, you know just how unpredictable animals can be. If a pet is injured, lost, or behaves unexpectedly after training, owners may hold you legally responsible.
You likely started your pet care business because you have a passion for animals. Professional liability insurance allows you to focus on providing exceptional care for pets — you know that if something goes wrong, you have a safety net in place.
Example: A dog trainer’s behavioral program doesn’t stick, and the dog bites a neighbor. The owner claims the training was faulty and takes legal action against the business.
Pet care professionals who need professional liability insurance include:
Quick Check: Do I Need Professional Liability Insurance for My Small Business?
- Do I give advice or provide expertise for a fee?
- Could a client lose money if I made a mistake?
- Do my contracts require proof of insurance?
- Have I ever had a client unhappy with my work?
- Would I struggle to afford a legal defense on my own?
If you answered “yes” to two or more, professional liability coverage is a smart move.
How Professional Liability Coverage Protects Your Business
Here’s a quick breakdown of how professional liability insurance protects you:
- A client claims you made a professional mistake, such as a missed deadline or delivered results that fell short of their expectations
- They file a complaint or lawsuit against your business; even if you did everything right, you still need to respond to their claim
- You let the client know you’re insured for situations like this, and your professional liability insurance steps in to manage the claim (including hiring attorneys and covering legal costs)
- If you’re found responsible, your policy can pay for damages or settlements up to your coverage limits
- If you’re not at fault, your coverage still helps protect your reputation by covering your defense and resolving the issue professionally
What does professional liability insurance cover?
- Legal defense costs
- Settlements (money paid to resolve the claim)
- Judgments (money the court orders you to pay if you’re found liable)
- Other costs to manage and investigate the claim
In short, this essential insurance helps cover the costs of protecting your reputation and keeping your business running.
Real Business Owners, Real Claims
A client claimed they suffered a knee injury after receiving a massage from our policyholder, a bodywork professional ($160,000).
A client claimed a dog sitter was negligent because their dog ingested acorns and became ill while under the dog sitter’s supervision ($2,079).
A client blamed a personal trainer for not watching them properly, leading to them falling off a stair machine and injuring their shoulder ($170,000).
Common Myths About Professional Liability Insurance
Don’t fall victim to these common myths about professional liability insurance. Let’s debunk them one by one:
“Only big companies need this.”
A client doesn’t care how big your business is. If they feel “wronged” by your services, nothing is stopping them from taking legal action against you. Even solo professionals can get sued for a recommendation that backfires or a perceived mistake.
“This coverage is too expensive.”
Professional liability insurance is more affordable than you think — and way more manageable than handling a lawsuit on your own. For example, personal trainers can get covered at Insurance Canopy for about 49 cents a day.
“General liability already covers me.”
General liability insurance only covers accidents and property damage unrelated to your expertise or technique. You need professional liability insurance specifically to cover your services.
“I’ve never had a problem, so I don’t need it.”
If you wait until something goes wrong, it’ll be too late. This coverage gives you peace of mind for right now, so that you’re protected when you need it the most.
Pro Tip:
Professional liability insurance is just one way to protect your business. Curious about what else you should carry? Learn what kind of coverage small businesses need.
How to Get Professional Liability Insurance
Insurance Canopy makes it easy to purchase professional liability insurance online and start offering your services confidently. Simply start an application and receive an instant quote right in your email inbox.
We offer top-rated coverage at an affordable price and are 100 percent dedicated to supporting your small business at every stage.
Protect the work you’re proud of — with professional liability insurance from Insurance Canopy.
FAQs About Small Business Professional Liability Insurance
What Is the Difference Between General Liability and Professional Liability Insurance?
General liability insurance is designed to cover third-party injuries and property damage that happen at your business. Professional liability insurance focuses on your expertise, covering mistakes or failure to deliver.
Learn more about the difference between general liability vs professional liability.
Do Freelancers or Consultants Need Professional Liability Coverage?
What Types of Claims Does Professional Liability Insurance Cover?
Professional liability insurance is designed to cover claims like:
- Professional mistakes
- Missed deadlines
- Unmet expectations
- Guidance that causes harm
How Much Does Professional Liability Insurance Cost for Small Businesses?
Is Professional Liability Insurance Required by Law?
No, this coverage is typically not required by law, but for certain industries, it may be required to maintain certain state licenses or for client contracts. Always check your local jurisdiction for applicable laws.
Even when it’s not mandatory, professional liability coverage is essential for protecting your business and demonstrating to clients that you’re a professional.
JoAnne Hammer | Program Manager
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
JoAnne Hammer is the Program Manager for Insurance Canopy. She has held the prestigious Certified Insurance Counselor (CIC) designation since July 2004.
JoAnne understands that starting and operating a business takes a tremendous amount of time, dedication, and financial resources. She believes that insurance is the single best way to protect your investment, business, and personal assets.
