Professional liability insurance, a form of E&O insurance, can protect businesses and business owners in the event of a professional error so that one mistake doesn’t cost you everything. We all do our best to provide the finest work we can at all times, however, mistakes happen so it is important to be insured. In this guide we talk about the average cost of professional liability insurance.
How Much Does Professional Liability Insurance Cost?
Professional liability insurance costs depends on several independent factors that are specific to you and your business. The best professional liability coverage is tailored to your individual needs so your premium might not match the prices listed here. Generally, though, the median cost for a small business is around $60 a month or about $720 a year. While this number isn’t representative of everyone, of course, the a lot of small businesses do pay an amount close to this.
According to Kristin Ryan of Hanson and Ryan, lawyers, who can receive claims just as quickly as they represent them, are considered high risk so may have higher than average premiums. Lower risk occupations can expect to play closer to the average. For higher risk occupations a full application will be required to evaluate their specific exposure to obtain a separate professional policy.
Cost Of Professional Liability Insurance By Industry
The industry you’re in could be a major factor in the price you pay for professional liability insurance. The cost of professional liability insurance varies based on multiple factors, most importantly your profession, but also your business’s revenue and claims history. Most policies cost around $1000 for one year, but if you have had claims in the past this number may rise significantly.
The level of risk that your products and/or services pose to consumers will be taken into consideration. Also, some industries are more prone to lawsuits or higher settlements. Others have many regulations that could leave you open to a lawsuit if you don’t follow them carefully. Here are some median costs of professional liability insurance by industry for reference:
- Finance & Accounting: $400
- Insurance: $550
- Consulting: $650
- Real Estate: $665
- IT/Tech: $730
- Media & Advertising: $845
- Building Design: $1,705
What Influences The Cost Of Professional Liability Insurance?
According to Zeshan Jeewanjee of One Day Event, the cost of professional liability insurance is most determined by your profession, but also your revenue and claims history. A professional liability policy can cost more or less depending on many distinct considerations. These also include:
- Coverage Limit: The maximum amount you want the insurance company to pay out in the event of a claim will change the price. This can be both the maximum per claim and the maximum per year.
- Industry: As discussed earlier, the kind of work you do and the risks that your profession presents will be a factor.
- State: Where your business is located will change the price.
- Business Size: How many people you employ is related to cost as well.
- Business History: The longer you’ve been in business, especially the longer you’ve gone without a claim, will impact your premiums.
Do I Need Professional Liability Insurance?
It may seem like it’s not a big deal to skip getting professional liability coverage, especially if you’ve never had a problem in the past. One large claim could bankrupt your business however. We live in a very litigious society, so the risk of a lawsuit is substantial for every business. Jeewanjee concurs and says big lawsuits against companies are becoming more common.
It’s better to be safe and know you’re covered than to take the gamble that you won’t be sued and lose. Given the potential consequences of deciding to forego professional liability insurance, the cost is extremely reasonable and, in the long run, worth it!
Professional Liability Insurance vs E&O Insurance
Many people wonder if professional liability insurance and errors and omissions insurance are the same thing. While, at times, the name is used interchangeably, there are some distinctions to be made between them. Professional liability insurance is a generic term for coverage that protects you from work-related liability. One of the specific kinds of insurance this term covers is E&O insurance. E&O insurance covers professionals who provide advice and/or services specifically. So, while E&O insurance is a kind of professional liability insurance, it’s important to understand the difference.
Getting the right professional liability insurance policy is important. It’s crucial that you never find yourself in a position where you could lose everything over one mistake, or even several. It’s better to be covered and not need it than the other way around. Make sure to go through your needs and the specifics of your business with your insurance company to make sure the kind of coverage you get is right for you.