Short answer
Professional liability insurance, also called errors and omissions or E&O, covers claims that your professional advice, services, or work caused a client financial loss, along with the cost of defending those claims. Businesses that give advice or perform professional services, such as consultants, agencies, and many licensed professionals, commonly need it because general liability does not cover these mistakes.
General liability handles bodily injury and property damage to others, but it does not respond when the problem is the quality of your professional work. Professional liability fills that gap, covering allegations of mistakes, missed deadlines, bad advice, or failure to deliver as promised, even when the claim is disputed.
Service businesses and licensed professionals are the typical buyers, and some clients or contracts require it before they will hire you. The right limit depends on the size of the engagements you take on.
Related
More questions about Coverage basics
- What is the difference between general liability and professional liability insurance?
- What is commercial property insurance?
- Do I need workers' compensation insurance?
- Do I need commercial auto insurance?
- Do I need insurance for a home-based business?
- Do I need business insurance to win a contract or sign a lease?
Browse more questions and answers.