When Do You Need Professional Liability Insurance?

liability insurance


Consultants who don’t know about professional liability insurance run the risk of being taken to court if one of their projects goes awry.

Professional liability insurance, sometimes called errors and omissions insurance (E&O), provides protection for businesses from risks not usually covered under general commercial liability insurance, which are two different kinds of policies.

As an independent contractor, you’ve probably had to set up your own insurance coverage, including health insurance and possibly other policies.

Along with these, you must evaluate your need for professional liability insurance, which will protect you if a client files a suit regarding how you did or didn’t fulfill your professional obligations.

This coverage may be necessary, in addition to any general liability policy you may have, to protect you in the event that clients sue, claiming that you caused them financial loss or interruption of services.

Professional Liability Insurance coverage is not provided by a Commercial General Liability policy. Commercial General Liability doesn’t provide coverage for errors, contract performance disputes or any other Professional Liability issues.

Companies who have General Liability without Professional Liability Insurance coverage are taking a serious risk. It’s like a doctor practicing medicine without Malpractice Insurance.

Consultants face a variety of risks purely because of the wide variety of services they offer. The risks largely depend on your specialty. For example, PR consultants may face risks of defamation and slander lawsuits, while human resource consultants could face risks of hiring someone who shouldn’t have been hired for obvious reasons. Any consultant can face the risks of being sued for tiny errors like those made in data entry.

Not having E&O puts you at risk because companies may feel they can take advantage of you since you’re not protected. Without it, businesses know the next course of action is a lawsuit, which would put you in danger of losing everything else you have in your life, like your home or financial assets.

Some Professional Liability Insurance policies even include coverage for lost income associated with defending yourself against a lawsuit. In other words, you may be able to secure a policy that pays you, should you be unable to work because of the claim. You can assess risk by looking at the type of work you do and the financial stake your clients have in it.