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How much does professional liability insurance cost?

How much you pay depends on the likelihood that your clients will claim that you were negligent.

Professional liability insurance covers your business if a client or patient claims that you provided incorrect advice, negligent service or caused them harm or financial loss. That means your premium for a professional liability policy depends on the chance that a client will file a claim against you. In this day of commercial lawsuits, businesses that provide professional advice or services should consider this liability coverage, even if it’s not legally required for your business. This insurance is also called errors and omissions insurance, or the shorter E&O.

How much will professional liability insurance cost?

Your business might pay anywhere from $50 to $600 per month for professional liability insurance, depending on your business’s industry risks and size.

For example, here’s a breakdown of the expected yearly insurance costs:

  • Small or low-risk businesses with few employees: $600 to $1,000
  • Mid-range businesses with medium risk or several dozen employees: $1,000 to $3,000
  • Large corporations with high risk or hundreds of employees: $3,000+

What affects the cost of professional liability insurance?

You won’t find a blanket price for professional liability insurance. Instead, insurance companies take several key issues into consideration when determining your cost:

  • Extending your coverage. You can buy tail or run-off coverage to extend your policy’s end date for a year or set a retroactive date to cover your past work if claims arise while you’re currently insured. Both types of coverage may raise your insurance premium.
  • Additional risks. Insurance companies will factor in different risks specialized to your business. Those risks can vary even within an industry if your business offers higher-risk services.
  • Amount of coverage. You can expect a higher premium if you buy PLI with high maximum limits.
  • Business size. Coverage for an independent consultant will cost much less than a global company with hundreds of employees. More employees increase the chance of a complaint arising toward your business.
  • Previous liability claims. You must tell your insurer about prior incidents that could lead to a client’s claim, but past claims can raise your risk level.
  • Type of industry. Certain industries involve more risky activities, such as prescribing medication or managing investment accounts.
  • Type of policy. Claims-made policies won’t cover you if you cancel the policy before someone files a claim against you. An occurrence policy lets you report a claim after the policy ends if the event happened while you had coverage.
  • Number of clients. A business with many clients or top-paying corporate clients may see higher premiums because the potential for costly damage increases.

Who needs professional liability insurance?

Any business that gives out professional advice should consider professional liability insurance. Your services and advice could turn into an unforeseen loss for your clients, even if your advice is supported by research or your services meet top-quality standards.

Also, customers may sue you for mental and emotional suffering, and you might even need to defend against false claims about your business. Liability cases and settlements can get expensive and take a toll on your business. Having PLI can mean the difference between a bump in your professional career and a devastating legal battle.

Some businesses provide higher-risk services than others, making them more expensive to insure. Businesses or individuals who might benefit from extra liability protection:

  • Accountants
  • Architects and engineers
  • Consultants
  • Counselors
  • Doctors, nurses and pharmacists
  • Financial advisers
  • Land surveyors
  • Lawyers
  • Personal fitness trainers
  • Physical therapists or speech pathologists
  • Public relations consultants
  • Real estate agents
  • Software developers
  • Surveyors
  • Tattoo artists
  • Teachers or trainers

What does professional liability insurance cover?

Your professional liability policy protects you from a variety of different claims, including:

  • Advice that led to financial or physical harm
  • Failing to complete your task or offered services
  • False claims of negligence or failure to perform your duties
  • Incorrect or misleading advice
  • Infringement of intellectual property
  • Lost or damaged documents
  • Negligent acts or omissions
  • Omitting advice that could have informed a customer decision

What expenses will be reimbursed?

    Your policy should reimburse you for expenses related to defending yourself in court and paying any settlements or fines. These may include:

    • You’re sued by a client. You get protection for the cost of defending yourself.
    • You owe money after a lawsuit. Your insurance pays settlement amounts you owe to the client suing you.
    • The government fines you. You can get compensated for civil fines you face as a result of your wrongful conduct or advice.
    • One of your employees causes a lawsuit. You get protection if the claim arises from an employee’s incorrect service or advice.
    • You lose a client’s important documents. Your policy may pay to replace any documents or information you lost out of negligence.

    How to save on professional liability coverage

    The following particulars may help you save money with PLI coverage:

    • Dialing down your company’s risk — Some insurers reward you for establishing a risk management program and improving weaknesses.
    • Sheltering multiple policies under one roof — Consider companies that offer a one-stop shop for all your business’s insurance policies. Then compare the cost with buying some low-cost coverage from a separate company.
    • Staying real about your risk — Stick with your legal or insurance professional’s advice for how much insurance your business needs. That way you can avoid over- or under-insuring.
    • Working with the professionals — Not convinced you’re finding the best deals for your company? Let a commercial insurance broker handle the shopping. Then, compare with your own findings.

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    Bottom line

    Professional liability insurance might cost you a thousand dollars or more each year. But its protection could save your business’s bottom line and help you repair your reputation after a pricey lawsuit. You can squeeze the most value for coverage by shopping around for the best business insurance providers.

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