Imagine this: A Yelp review for your small business that says, “They messed up, and it cost me big!”
If you’ve ever wondered about the possibility of a client claiming you’ve made a mistake, then you need professional liability coverage, which is protection for your services or advice.
It’s easy to get confused about different types of professional liability insurance and which is right for you. We’re breaking down exactly what you need to defend the “professional” side of your business — so that one bad review or misunderstanding doesn’t undo all you’ve built.
TL;DR: The type of professional liability insurance you need is based on the services or advice you provide. If your services run the risk of unintentionally “harming” a client, you need the right coverage to financially protect your business.
Crash Course: What Is Professional Liability Insurance for Small Businesses?
Professional liability insurance protects you if a client claims your professional advice, service, or work caused them harm. This includes physical injury, property damage, or financial loss.
This coverage is an essential type of small business insurance that pays to defend you if someone claims your business blundered.
Quick Examples
- A marketing consultant recommends a campaign that backfires and loses their client’s money
- A personal trainer creates a workout plan for a client, but the client says they failed to deliver results
- A private tutor preps a student for the SAT, but the parents are dissatisfied with their child’s exam scores
Professional liability coverage is designed to respond to claims like these, so you can continue doing what you love — without fear of a single mistake putting you out of business.
Professional Liability vs Errors and Omissions Insurance: What’s the Difference?
Professional liability insurance and errors and omissions (E&O) insurance are the same coverage. This alternate name simply breaks down the two types of claims E&O covers: professional mistakes (errors) and work that is neglected or left undone (omission).
If your business has the potential to make an error or not deliver as expected, you need professional liability (aka errors and omissions) insurance.
Did you know? Even if you did everything right, clients can claim you dropped the ball. Professional liability insurance can also cover perceived mistakes — when it’s your word against others.
Professional Liability vs General Liability Insurance: What’s the Difference?
General liability insurance may cover third-party injuries and property damage that happen at your business, unrelated to your professional services. This includes customer slip-and-falls and other accidents wherever you operate.
On the other hand, professional liability insurance protects the services you provide as an expert.
The easiest way to differentiate the scope of professional versus general liability insurance is to ask: Was the harm caused by my advice or instruction (professional liability), or did it just happen to occur at my business (general liability)?
And if you’re wondering whether you need both coverages, the answer is yes! Together, they protect against the most common claims that small business owners face.
One Core Coverage With Multiple Key Protections
For small businesses, professional liability insurance helps cover claims tied to your services, advice, or expertise. It’s designed for non-medical and non-legal industries, such as:
- Consultants
- Contractors
- Educators
- Fitness professionals
- Beauty and bodywork professionals
- Pet care professionals
- Coaches and mentors
- Business/financial professionals
- Other service-related professions
So, while the coverage may be tailored to your specific risks and called, for example, “consultants’ professional liability insurance,” its underlying purpose is the same. It protects your work.
When understanding which type of professional liability coverage is right for you, the more relevant question is, “What does professional liability cover?”
Let’s go over the main categories of claims this coverage responds to. These aren’t separate policies, but rather different ways clients might file a claim, all handled under the same professional liability policy.
Comparison Table: What Each Professional Liability Claim Category Means
| Category | What It Means | Simple Example |
|---|---|---|
|
Errors and Omissions |
A mistake or something important was missed while doing your work
|
A consultant leaves out key data in a report
|
|
Professional Negligence |
Your work didn’t meet the normal level of skill or care for your profession
|
A hair stylist doesn’t perform a proper patch test
|
|
Breach of Contract |
You didn’t meet a deadline, deliverable, or agreement in the contract
|
A contractor misses a project milestone
|
|
Unmet Expectations |
The client didn’t get the results they thought they would get — even if you did everything you agreed to |
A life coach’s client doesn’t achieve the goals they hoped for
|
|
Violation of Professional Standards |
Your work didn’t follow accepted procedures, ethics, or industry standards
|
An auditor doesn’t follow standard review steps
|
Errors and Omissions
Errors and omissions are mistakes or things you accidentally missed while performing your work. They can include:
- An overlooked detail
- A missed step in your process
- A recommendation based on incorrect information
Example:
A consultant forgets to include key cost details in a report, and a client bases their decision on incomplete information.
Even small, honest mistakes can lead to significant problems. E&O coverage is built to help you in situations just like this.
Professional Negligence
Negligence is when a client claims you didn’t use the level of skill or care another professional in your field would normally use. This can include:
- Poor quality work
- Giving advice that doesn’t meet industry norms
- Not taking reasonable steps to prevent an issue
Example:
A hair stylist fails to perform a patch test before applying hair dye, and the client suffers a chemical burn on their scalp.
You don’t actually need to be negligent for a client to feel that you were. That’s why it’s essential to carry professional liability coverage to defend your reputation and business if a minor mishap turns into an expensive claim.
Breach of Contract
A client may accuse you of not completing work as promised or not meeting the contract terms. This is also known as “failure to deliver,” and you can be held liable even if the issue was out of your control. This includes:
- Missed deadlines
- Not delivering specific results
- Delays caused by other parties you work with
Example:
A contractor misses a deadline due to material delays, and the client demands damages for lost time.
Breach of contract is one of the most common triggers for a professional liability claim. You do your best to deliver exactly what’s promised, but when factors beyond your control cause problems, you need financial and legal support to continue operating your business.
Unmet Expectations
Sometimes clients expect one thing and feel like they got something else, whether or not you deliver what the contract outlined. These claims are often based on perception, not actual mistakes.
Unmet expectations can look like a client:
- Believing the results should have been better
- Misunderstanding the scope of your services
- Assuming your work would lead to a specific outcome
- Feeling dissatisfied with the quality of your work
Example:
A life coach provides weekly sessions and a clear coaching plan for a client, but the client doesn’t achieve the personal or career results they were hoping for.
You can do everything by the book and still face a claim due to misalignment. Professional liability insurance steps in when a client’s inflated expectations don’t match up to your completed work.
Violation of Professional Standards
Claims regarding violations of professional standards say you didn’t follow recognized best practices or ethical rules in your field. Sometimes these rules aren’t legally required, so they might fall into a gray area. This can include:
- Not following standard steps or procedures
- Providing work that doesn’t align with your professional license or training
Example:
A certified auditor is accused of not following proper procedures, despite the outcome being correct.
Claims of “standards violations” can become technical, time-consuming, and expensive. Having the right coverage in place is crucial, so you don’t get bogged down by defending yourself out of pocket.
You Should Also Know: Certain professions, like doctors, lawyers, or IT developers, have their own specialized forms of liability insurance, such as medical malpractice or tech E&O. These are unique to their fields. For most professionals and small businesses, professional liability coverage is the right fit.
Insurance Canopy for Professional Peace of Mind
You’ve worked hard to build your business. And although we wish there were a way to truly bubblewrap your professional services — and all the work and time you put into them — professional liability insurance is the next best thing.
Get coverage tailored for your industry and your unique risks with Insurance Canopy. Our policies are crafted to fit your business and are available to purchase online in minutes, with friendly, licensed U.S.-based agents ready to support you when you need it.
When it comes to your professional reputation, don’t leave mistakes to chance. With the right coverage, you can confidently offer the services that make your business stand out.
FAQs About Types of Professional Liability Insurance
Does Professional Liability Cover Breach of Contract?
Claims-Made vs Occurrence — What’s the Difference for Professional Liability?
How Much Professional Liability Coverage Do I Need?
What Professions Need Malpractice vs E&O Insurance?
Kyle Jude | Program Manager
Kyle Jude is the Program Manager for Insurance Canopy. As a dedicated program manager with 10+ years of experience in the insurance industry, Kyle offers insight into different coverages for small business owners who are looking to navigate business liability insurance.
Kyle Jude is the Program Manager for Insurance Canopy. As a dedicated program manager with 10+ years of experience in the insurance industry, Kyle offers insight into different coverages for small business owners who are looking to navigate business liability insurance.
