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Professional Liability Insurance Costs for Different Professionals

Lawsuits can happen anytime and almost anywhere. Every day, it seems like the news is covering a new lawsuit against a company or individual. In fact, the problem gets so bad that a federal district court imposed a $9.1 million fine on a Florida firm for filing too many frivolous lawsuits, as reported by the American Bar Association in 2018. In order to keep yourself and your business protected, that’s where professional liability insurance comes in. Depending on your profession, the professional liability insurance can be expensive. We discuss the factors influencing the cost of professional liability insurance in several scenarios for your reference and give you some idea how much it costs.

How much does professional liability insurance cost?

Professional liability insurance coverage can be obtained by two ways: a component included in a business owners policy (BOP) or a stand-alone policy. In general, small businesses who need a BOP policy anyway would also prefer to have the professional liability insurance coverage included in the BOP policy.

On the other hand, businesses that are more specialized in giving advice and delivering unique services such as healthcare or legal or financial professionals and providers are usually required to have a stand-alone professional liability insurance policy.

Learn more the details of professional liability insurance cost.

The cost of professional liability coverage when it is included in your Business Owners Policy (BOP)

You may never know the actual cost of your professional liability coverage when it is included as a component of your broader business coverage. When you purchase your Business Owners Policy (BOP), you will likely be asked a series of questions, either online or by an insurance agent or company representative, about your business, including its size, the industry you’re in, the types of clients you serve, your experience and that of your employees and the risks you face. You will then receive a quote back that will include professional liability coverage as a component of it. It may be a line item or part of a broader package. You may have some back-and-forth with your agent or insurance company representative about the level of coverage you want, how much you can spend on it and how much you can afford out of pocket if a claim is made against you. You can then decide on how much coverage you need. 

Some sources report that professional liability could add $50 to your policy each month, but this could vary dramatically (by hundreds or thousands of dollars) depending on the factors involved in your quote.

The cost of professional liability insurance coverage when it is a stand-alone policy

The average cost of a stand-alone professional liability insurance policy for small businesses is $80 a month, or $960 a year. Of course, the actual cost significantly varies by several factors such as industries, the size of the business, the location of the business, etc.

Some of those factors based on industry include:

  • Healthcare. The type of business (for example, single practitioner, pharmacy, clinic, hospital), areas of specialization (immunization, school care, pregnancy, cancer surgery), number of employees and their experience (fresh out of school, highly experienced, nearly retired) will all impact the cost of your coverage.
  • Legal. The type of legal service (wills, mortgages, mergers and acquisitions, divorces, family law, criminal law), clients you serve (individuals, families, small businesses, large corporations), number of employees, their experience (fresh out of law school, experienced, legal expert) and more will impact your costs.
  • Agents. The industry you work in (insurance, real estate or other), the scope of your business (single agent, multiple providers, one or more locations), size of your clients (individuals and families, businesses or corporations), experience (new agent, experienced, licenses or not) will all be considered when you get a quote.
  • IT industry. Similarly, the types of technology services you provide (installing software, developing software, building infrastructure), the clients you work with (individuals, small businesses, corporations), size of your operation (sole proprietor, multiple employees, many locations) and the experience of the people involved, will impact your quote.
  • Finance. Of course, when you’re dealing with people’s — or company — finances, your level of professional liability will be relatively high. Someone who advises parents on how to save for college will pay less for professional liability coverage than someone advising on investing for a large pension plan, or handling a corporation’s bookkeeping. You’ll pay less to insure experienced professionals than people who are relatively new to the industry. And the size of your operation will have an impact on how much professional liability coverage will have on your overall business insurance costs.

For healthcare and legal professionals, professional liability coverage is usually called malpractice insurance. Malpractice insurance can cost from a few hundred dollars a month (for nurses for example) to a few thousand dollars a months (for family doctors or counselors) to a few hundreds of thousands of dollars a month (for surgeons or OB/GYN doctors. Learn more about the cost of malpractice insurance for different specialties.

For agents, IT, and finance professional, professional liability insurance is sometimes called errors & omissions (E&O) insurance. Learn more about the cost of E&O insurance for different professionals.

So, in general, the riskier your industry, the risks faced because of the types of clients you serve, the size of your client base, the scope of the work you do, your experience and that of the people who work for you will all impact your quote.

If your business is on the simpler, smaller and safer end of this scale, it will pay less for the professional liability component of your business coverage. It could be in that $50 per month estimate or less. If it’s on the more complex, larger and riskier side of it, it will be higher, and could reach into the thousands of dollars per month, especially if it involves the challenging medical and legal practices.

Another thing that could impact your coverage includes your deductible, which is the amount you have to pay out of pocket because of a professional liability claim, but this factor is tiny when compared to the other factors that go into a professional liability estimate.

>>MORE: Professional Liability vs. Malpractice vs. E&O Insurance: How Are They Different?

How much does professional liability insurance cost for federal employees?

Federal employees include anyone from law enforcement to working for the forest service. Federal employees have the same risk of being accused of misconduct or mistakes as their peers in the private sector do.  There is a special kind of professional liability insurance, or sometimes called malpractice insurance, for federal employees, though, called Federal Employee Professional Liability Insurance, or FEPLI. 

FEPLI isn’t too expensive. It can range from $100 to $2,500 a year for a policy, depending on the kind of federal work you do. Be sure to shop around to get the best quote.

How much does professional liability insurance cost for teachers and educators?

As a teacher, it’s probably never occurred you to get insurance. After all, you’re a public servant, and if someone gets sued, it would be the school you work for, not you personally, right? Not necessarily. Professional liability insurance for teachers is becoming increasingly common as society becomes more litigious. The district where you work has insurance, but that protects their interests, not yours. 

Professional liability insurance for teachers has become more and more popular. The good news is that it isn’t too expensive. You can get a policy for about $100 a year. Learn more here.

How much does professional liability insurance cost for accountants and CPAs?

As an accountant or CPA, you know that you have to keep track of many rules and regulations, it is easy to overlook or omit one. 

Accountants and CPA’s work with money, which can be a very emotionally charged issue. It’s also very detailed work and it can be easy to make a mistake. You might also provide advice to your clients, and if that advice proves to be in error, the client could sue you. If you’re doing tax preparation for a client and you enter even one number incorrectly, this could affect the client’s bottom line and they could sue you. 

The cost of professional liability insurance for accountants and CPAs is from $40-$100 a month. How much you pay for professional liability insurance depends on things like:

  • Location
  • Claims history
  • Amount of revenue

Some states have higher rates because there are more lawsuits filed there. CPAs also tend to pay more for insurance because of the detailed and intricate nature of their work, which means a greater potential for error. Also, clients of CPA’s have higher expectations and CPA’s must adhere to strict professional standards. See more here.

How much does professional liability insurance cost for private investigators and policemen?

Private investigators many actually need many business insurance coverages, one of which is professional liability insurance.

Professional liability insurance offers extra protection in the event of errors and omissions due to a lack of proper counsel. For example, if an employee background check does not meet proper protocols, a lawsuit by the hiring employer may be filed.

In addition, as noted above, privacy invasion coverage can be included in professional liability insurance for private investigators. You should contact an agent who understand business insurance well to ensure proper coverage included in your policies for your particular business needs.

A professional liability insurance policy can cost a private investigator from $60 to $100 a month. Learn more here.

How much does professional liability insurance cost for architects and engineers?

Architects who design big money properties will undoubtedly be sued if expectations are not met. Princeton University filed a $10.7 million dollar lawsuit against lead designers for additional costs due to delays. (Archinect) And that’s just one lawsuit. 

Architects and engineers often serve corporate clients, who may be more inclined to sue to recoup their financial investment if things go wrong. And if you’ve worked as an architect or an engineer, you know that a lot can go wrong. Contractors can misinterpret renderings, resulting in delays. Someone orders incorrect materials and they can’t be returned. A structural engineer makes a bad recommendation. 

A professional liability insurance policy can protect architects and engineers in these cases. The good news is that it isn’t too expensive. The average cost of a professional liability policy to an architect or an engineer is $150-$200 a month. See more here.

What is professional liability insurance?

Even if you’re the absolute best at what you do, mistakes and unintentional errors happen. If a client or customer believes a mistake or error committed by you or an employee while providing professional services to them resulted in a financial loss or other harm, they can sue you.

Professional liability insurance helps cover you and your business if you or someone who works for you makes a mistake when providing professional services that has a negative impact on a person you provide the services to. This coverage is also known as errors and omissions (E&O) insurance or professional indemnity insurance.

What does professional liability insurance cover?

Professional liability insurance helps cover claims related to things like:

  • Mistakes or negligence. Services provided (or not provided) by your company that aren’t what the client expects and result in a lawsuit or judgment against your business.
  • Misrepresentation. This includes making claims to customers or saying things to them that aren’t completely true.
  • Inaccurate or incorrect advice. Providing advice or direction to a client that causes them harm.
  • Copyright infringement. This includes copyright law issues, mistakes, oversights and misunderstandings.
  • Personal injury. This encompasses all types of physical harm caused by services provided by you or the people who work for you.
  • Libel or slander. Claims are covered whether the questionable statements are found to be true or not.

Even if you don’t do anything wrong, a client is still able to sue your business if they think you made a mistake or did not provide adequate service. Without professional liability insurance, you will have to pay the costs to legally defend yourself out of pocket, even if you’re found innocent. Costs related to these kinds of lawsuits are typically high, even if you did absolutely nothing wrong.

Here are some scenarios that professional liability insurance can help with:

  • An accounting firm makes a math mistake that costs a client a lot of money
  • A florist forgets to deliver flowers to a wedding
  • A realtor sells someone who wants to open a home-based business a house in a gated community that doesn’t allow them.

In each case, the business is sued for the mistake they made.

What doesn’t professional liability insurance cover?

Professional liability insurance doesn’t cover everything related to business mistakes. It won’t cover the following types of claims: 

  • Bodily injury or property damage: You’ll need to get a Business Owners Policy (BOP) with general liability insurance to help cover costs if someone is injured on your business premises and the injury is not specifically related to the services your operation provides or you or an employee damages someone else’s property while conducting business.
  • Work-related injuries or illnesses: If your employees get hurt or sick for reasons related to their job, it will be covered by your workers’ compensation insurance. This insurance is required for most businesses and pays expenses related to helping them recover and return to work.
  • Data breach: If a cyber criminal steals or compromises confidential or sensitive online information about your clients, customers and employees, the costs related to informing the impacted parties and making them whole will be covered by cybersecurity insurance.

How does professional liability insurance work?

Professional liability insurance has an added layer of complexity that many other business-related policies don’t have. 

Typical business insurance only covers claims when the policies are in effect. Most professional liability policies are based on when claims are made with a retroactive date and extended reporting period.

  • The retroactive date means the policy holder is covered for incidents that happen on or after a specified date.
  • The extended reporting period covers claims filed during a specified time after the policy expires. This is usually a 30- to 60-day period, but it can be extended to a year or more for an additional cost.

An insurance company will actually cover claims made against a business during the period the professional liability policy is effective, or within its retroactive date or extended reporting period. Other than this, you should contact your insurance provider as you would for any other type of insurance when you need to make a claim.

Who needs professional liability insurance?

Some states require it for certain types of businesses. In others, business owners get to decide whether they should get coverage.

You should get a professional liability insurance policy if you:

  • Sign a contract that requires it
  • Provide professional services directly to clients and customers
  • Regularly give advice to clients.

Examples of the types of people who usually get professional liability insurance include:

It’s a smart idea for anyone who provides professional advice and services to others to consult with an insurance agent to find out whether they should get professional liability insurance.

Claims-made or occurrence professional liability insurance

There are two main types of professional liability insurance policies to look into. The first type is called claims-made and the second is called occurrence.    

Claims-made policies simply mean that the policy has to be in effect at both the time of the incident in question and when the lawsuit is filed to be eligible for coverage.

An occurrence policy covers the incident that led to the lawsuit as long as it happened when the policy was effective. For instance, if you commit a clerical error while you have the policy, then retire and get sued after the policy has lapsed, you can still be covered. These make the most sense if you’re close to retirement, as the hypothetical situation shows, or if you may be thinking of a career change.

>>MORE: Best Professional Liability Insurance for Small Businesses

Final Thoughts:

  • Professional liability insurance, sometimes called E&O Insurance or malpractice insurance, covers you in case you are sued for accused or actual negligence, errors or omissions in the services or products you provided to others.
  • You have two main types: claims-made policies and occurrence policies. Claims-made covers you if the event of negligence and lawsuit happened while the policy was active. Occurrence covers you if just the event of negligence happened while the policy was active.
  • Costs can range drastically based on a wide variety of conditions, like how long your business has been operational, the different plan benefits you select and what type of industry you are in, to name a few examples.
  • The main benefits to look for are how much you’re paying in deductibles and how much the plan pays out for both incident and plan total.   
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