The short answer: Professional services insurance protects accountants, engineers, lawyers, consultants, and other professionals if a client says your work or advice cost them money.
Your clients pay you for your expertise. If they think you made a mistake, they may sue, even if you did nothing wrong. The right insurance pays for your defense so you do not have to.
Key Takeaways
- Professional liability is the most important coverage for anyone who gives advice or provides a service.
- It is also called errors and omissions insurance, or E&O.
- General liability does not cover mistakes in your work.
- Even a false claim can cost thousands to defend.
- Many clients require you to have it before they will hire you.
Who Needs Professional Services Insurance?
If clients pay you for your advice, skills, or expertise, you need it.
That includes:
- Accountants, CPAs, bookkeepers, and tax preparers
- Engineers and architects
- Lawyers and law firms
- Consultants
- IT and tech professionals
- Marketing and design agencies
- Real estate agents
- Financial advisors
It does not matter if you work from an office, from home, or at client sites.
What Does Professional Services Insurance Cover?
Professional Liability (Errors and Omissions)
Covers you if a client says your work or advice cost them money.
Examples:
- An accountant misses a tax deadline and the client gets hit with penalties
- An engineer makes a design error and the project has to be redone
- A lawyer misses a filing deadline and the client loses their case
- A consultant gives advice that leads to a big loss for the client
It pays for lawyers, court costs, and settlements. It helps even if the claim is false.
Learn more about professional liability insurance.
Pro Tip: Keep this coverage in place. If you let it lapse, a claim about work you did in the past may not be covered.
General Liability for Professionals
Covers accidents that hurt someone or damage their things.
Examples:
- A client trips on a rug in your office and breaks a wrist
- An engineer knocks over expensive equipment during a site visit
- A delivery driver slips on your wet floor
General liability covers accidents. Professional liability covers mistakes in your work. Most professionals need both.
Office Property Insurance
Covers your office and the things inside it.
Examples:
- A fire damages your office
- Someone breaks in and steals your laptops
- A burst pipe ruins your computers and paper files
It can also help replace lost income if you have to close while repairs are made.
Many offices buy property and general liability together in one package, which usually saves money.
Cyber Insurance for Professionals
Covers you if client information is stolen or your computers are hacked.
Accountants, lawyers, and advisors hold a lot of private client information like Social Security numbers, tax returns, and bank details.
Examples:
- A hacker steals client tax returns from your computer
- A virus locks your files until you pay a ransom
- An employee clicks a fake email and client data is exposed
It can pay to notify clients, fix your systems, and defend you if clients sue.
Workers’ Comp for Office Staff
Covers your employees if they get hurt on the job.
Examples:
- An employee trips over a cord and breaks an ankle
- An engineer is injured while visiting a job site
- A staff member hurts their back moving boxes of files
It pays their medical bills and part of their lost paycheck. Most states require it once you have employees.
Other Coverages to Ask About
- Employee claims: if a worker says they were fired unfairly or treated wrong
- Umbrella: extra protection on top of your other policies for very large claims
- Commercial auto: if you or your staff drive company vehicles for work
A Simple Example
A small accounting firm has 3 employees.
During tax season, a client’s return is filed late.
The IRS charges the client $15,000 in penalties. The client sues the firm to get that money back.
Without professional liability: The firm pays for its own lawyer and the $15,000 out of pocket.
With professional liability: The insurance company hires a lawyer, defends the firm, and pays the claim if the firm is found responsible.
One claim can cost more than years of insurance.
Professional Liability Insurance FAQs
What is the difference between general liability and professional liability?
General liability covers accidents, like a client tripping in your office. Professional liability covers mistakes in your work, like a missed deadline or bad advice.
Is professional liability insurance required?
Sometimes. Some states and licensing boards require it for certain professions. Many clients also require it in their contracts before they will hire you.
How much does professional liability insurance cost?
It depends on your profession, your revenue, how many employees you have, and your past claims. A one person consulting business usually pays much less than a large engineering firm.
Do I need professional liability if I work from home?
Yes. Clients can sue you over your work no matter where you do it.
Does professional liability cover me if the claim is false?
Yes, it can pay for your defense even when you did nothing wrong. That is often the biggest cost.
Where can I get professional services insurance?
Nelson Insurance Agency offers professional services insurance for accountants, engineers, lawyers, consultants, and more in 42 states.
The Bottom Line
Professional services insurance is not one policy. It is a few coverages that each protect you from a different problem:
- Professional liability for mistakes in your work
- General liability for accidents
- Property for your office and equipment
- Cyber for stolen client information
- Workers’ comp for staff injuries
Make sure you have the pieces that fit your business. Not sure what you need? See our professional services insurance options.
