While general liability insurance is primarily focused on property damage or bodily injury, professional liability insurance, also called errors and omissions insurance (E&O), protects you if a client claims that your services caused them to suffer a financial loss.
Many professional services companies choose to purchase E&O insurance policies, which are typically issued in increments of $1 million and have per-claim deductibles ranging from $1,000 to $25,000.
Some insurance companies are reluctant to issue professional liability policies, while others specialize in policies for specific professions. Because we have access to multiple insurance carriers and work with a wide range of small business professionals, we know how to find E&O insurance coverage that is comprehensive and yet fits your small business's budget.
It's important to note that almost all professional liability insurance policies are sold on a "claims-made" basis. This means that the insurance only covers work performed while the policy is in force, and for claims actually filed during the term of the policy. If you cancel your E&O insurance policy without arranging for an extended reporting period, your coverage would end, and any claims submitted after the cancellations would not be covered, even though the work was performed while the policy was in effect. To ensure protection, you must continue your coverage long after your engagement is complete.
It's also important to know that there are exclusions in every errors and omissions insurance policy. Before you purchase this type of policy, you'll want to think about the most dangerous threats and professional risks for your business, and look for a policy that covers those specific risks.
E&O insurance doesn't protect you if you should get sued for something like stealing a client's customer away. For these types of situations, you may wish to create a contract that outlines procedures for conflict resolution and clearly states your and your client's rights.
The chance of getting sued often has less to do with the quality of your work than with your client's temperament and expectations. If your client relationship goes sour for any reason, you could be accused of negligence even if you didn't make any mistakes. That's why it's so important to carry professional liability insurance, even if you've never been sued.