Professional Liability Insurance: What Is It?

Professional liability insurance (PLI) is a type of liability insurance that helps protect a business or a professional that gives personal advice and/or provides services from bearing the full cost of legal claims. This type of insurance protects workers when sued for negligently performing services, even if a mistake has not been made.

You need PLI at your job or in your business if you:

  • Offer a professional service
  • Advise clients on a regular basis
  • Have a client that asks for PLI as part of a contract

Professional liability insurance is also known as errors and omissions insurance and indemnity insurance.

Why Is Professional Liability Insurance Important?

At almost any time, any business owner or worker can be sued. Lawsuits may claim you've been careless or made a mistake or omission during your service to a customer. Damages, settlements, or judgements can cost thousands or even millions of dollars. Court costs and lawyer fees add up quickly. Lengthy court trials empty savings accounts and sometimes cause bankruptcy.

Professional Liability insurance protects your business's reputation and its assets. Some PLI policies offer special coverage that's not found in standard policies. Professional liability insurance is protection for what you hold dear — the business and career you've worked hard for and your family's well-being.

What Does Professional Liability Insurance Cover?

As a professional, you're expected to complete your work professionally and follow specific behavior rules for your job. If you make a mistake, you can be held responsible for any harm done to a person, business, or property.

This insurance offers coverage for:

  • Negligence: Whether the careless behavior happened or is only reported, PLI covers claims against mistakes or omissions including giving wrong advice, leaving out facts or information, or failing to deliver services.
  • Defense costs: Pays for legal defense when claims are filed no matter who is to blame.
  • Already completed work: Covers claims related to work already done back to an agreed upon date.
  • Worldwide coverage: Some policies cover work you do anywhere in the world as long as the claim is filed in the U.S. or one of its territories.
  • Contractors, temporary staff, and employees: Covers those working for your business.
  • Copyright infringement: Some policies protect you against these claims.

Who Needs Professional Liability Insurance?

Any worker or business that gives advice or performs services for customers should have PLI coverage. These can include:

  • Hair salons/barber shops
  • Sports and personal trainers
  • Counselors
  • Lawyers
  • Occupational and physical therapists
  • Business consultants
  • Real estate agents
  • Photographers
  • Travel agents
  • Funeral directors
  • Veterinarians

Some jobs and businesses have specific types of PLI created for their profession, including:

  • Accountants
  • Dentists
  • Architects and engineers
  • Nonprofit organization directors and managers
  • Technology services

Health care workers also need a special type of PLI called medical malpractice insurance. It's not just doctors that face malpractice claims. Other health care workers that should carry medical malpractice insurance are:

  • Counselors
  • Nurses and nurse practitioners
  • Occupational and physical therapists
  • Clinical social workers
  • Physicians' assistants

Malpractice insurance provides coverage for medical specialties like:

  • License protection: Helps defend state licenses in the event someone files a complaint to the state licensing board.
  • Information privacy: Covers costs of notifying patients of a breach of HIPAA privacy laws and HIPAA fines and penalties if needed.
  • First aid: Reimburses money spent giving first aid to others.
  • Sexual misconduct: Protects against allegations of sexual misconduct.
  • Defendant expenses: Reimburses wages lost during trial or hearings as a defendant.

What Type of Professional Liability Insurance Should Be Bought?

There isn't a blanket PLI policy. Each policy is different, and wording and coverage varies from one company to another. Every policy is specific to the person or business it protects. Things to look for in a policy include:

  • Is the legal defense cost taken from the policy limit or is it paid separately?
  • What limits are needed for property and punitive damages or personal injury?
  • Do I need extra special coverage in addition to PLI for this line of work?

Each policy must be carefully written by an experienced underwriter and carefully read by the buyer ensuring proper coverage.

Professional Liability Insurance Carriers

Most well-known insurance companies offer professional liability insurance, including:

  • GEICO
  • Progressive
  • Nationwide
  • State Farm
  • Farmer's
  • Wells-Fargo

There are also firms that specialize in professional liability insurance:

  • American International Group (AIG)
  • Hiscox Insurance Company Inc.
  • American Professional Agency Inc.
  • The Ace Group
  • North American Professional Liability Insurance Agency LLC
  • Chubb Group of Insurance Companies
  • Great American Insurance Group
  • Marsh USA Allied World Insurance
  • Allied World Insurance Co.
  • Aspen Insurance
  • AXIS Insurance
  • Beazley
  • Berkeley Design Professional Underwriters
  • Euclid A/E
  • Hanover Insurance Co.
  • TM/HCC
  • Ironshore
  • Liberty International Underwriters
  • Markel
  • Navigators Management Co. Inc.
  • RLI
  • Travelers Insurance
  • Victor O. Schinnerer & Co. Inc.
  • XL Catlin

Frequently Asked Questions

  • How do I know if I need professional liability insurance?

If you have a small business or fall within the service or health care fields, you should consider professional liability insurance.

  • How do I know if my job is in the service field?

If what you do at work is a task customers pay you for, you're likely working in a service job.

  • How much is professional liability insurance?

Policy price depends on your business, location, coverage limits, and amount of employees.

  • Where do I get professional liability insurance?

You can purchase coverage from an insurance agent or specialty firm.

If you need help with professional liability insurance, you can post your question or concern on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.