Professional Liability
What Is Professional Liability?
Professional liability insurance is a type of coverage designed to help protect professionals and service-based businesses when a client claims their work, advice, or services caused a financial loss.
Also called Errors & Omissions or E&O, professional liability insurance helps protect your business if a client claims your professional services, advice, or work caused them a financial loss.
This coverage fills an important gap that general liability doesn’t cover, especially for service-based and knowledge-based businesses.
What Does Professional Liability Cover?
Professional liability is designed to cover you when you need it most, even years after the work is done.
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| Coverage | How It Works | Why It Matters For E&O |
|---|---|---|
|
Occurrence |
Policy responds based on when the incident/error happened (during the policy period), even if the claim is made later |
Many of Insurance Canopy’s policies are occurrence-based E&O, so you generally wouldn’t need tail coverage to protect past work |
|
Claims-made |
Policy responds when the claim is made and reported, not just when the work was done |
You must have active coverage when the claim comes in |
|
Retroactive date |
The earliest date your work can have occurred and still be covered |
Work done before this date is generally not covered |
|
Continuous coverage |
Keeping your claims-made policy active year after year without gaps |
Helps protect work from prior years, as long as the retro date stays the same |
|
Extended reporting period (tail coverage) |
Extra time to report claims after the policy ends (for past work) |
Helpful if you retire, close your business, or switch policies |
What is General Liability vs Professional Liability?
General liability and professional liability insurance both protect your business, but they’re designed for very different kinds of risk.
General liability insurance covers physical risks, like bodily injury, property damage, or certain advertising-related claims that can happen during everyday business operations.
Professional liability insurance covers claims tied to your work itself. It helps protect you when a client says your professional services or advice caused them a financial loss. Physical injury or property damage doesn’t have to be involved.
Many service-based businesses carry both types of liability coverage because they cover different, yet equally important risks.
Who Needs Professional Liability Coverage?
Professional liability insurance is especially important for businesses where clients rely on your expertise, advice, or work product.
| Profession / Business type | Examples of a Professional Liability Claim |
|---|---|
|
Business consultant |
Client alleges your advice caused revenue loss or cost overruns |
|
Marketing or branding agency |
Campaign allegedly damages brand or fails to meet promised results |
|
Web developer / IT professional |
Errors or downtime cause lost sales |
|
Coach or trainer (business, life, fitness, etc.) |
Client claims your guidance caused financial or personal harm |
|
Accountant or bookkeeper |
Filing error leads to penalties or tax issues |
|
Designer (graphic, UX, interior) |
Design mistake leads to rework costs or lost business |
|
Educator or instructor |
Client claims training was inadequate and led to losses |
You Probably Need Professional Liability If…
- You give advice, recommendations, or professional opinions that clients rely on
- You design plans, strategies, programs, or systems that others implement
- Your work is more intangible (ideas, strategy, training, code, design) than physical
- Your contracts mention “professional services,” “E&O,” or “professional liability”
- A mistake in your work could cause a client financial loss (even if no one gets hurt)
- Clients ask for proof of professional liability or specific coverage limits
Professional liability insurance provides peace of mind, allowing you to do your best work with a little more confidence.
Additional Resources
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