Professional liability insurance

They cover two different kinds of harm. Professional liability, or E&O, pays when your professional work, advice, or a missed deadline costs a client money. General liability pays when your operations physically injure someone or damage their property, like a client tripping in your office. A consulting error that loses a client a deal is an E&O claim. A bookshelf falling on that same client is a general liability claim. The policies do not overlap, and most service firms carry both, because a client contract usually asks for each one at a stated limit before the work can begin.

Almost all E&O is written on a claims-made basis, which means the policy that responds is the one in force the day the client files the claim, not the one in force when you did the work. The retroactive date is the cutoff: the policy only covers work performed after it. When you first buy E&O the date is usually set to that day, and on every renewal it should stay the same. If a new carrier resets the retroactive date forward, all of your earlier work becomes uninsured, even though you have paid for coverage every year. Protecting that date is the single most important thing in a claims-made policy.

Usually not when you switch, as long as the new carrier keeps your existing retroactive date, which preserves coverage for past work. You need a tail, formally an extended reporting period, when coverage actually ends: you retire, close or sell the firm, or move from claims-made to occurrence coverage with no prior acts. The tail lets you report claims on past work after the policy is gone. It typically costs one to three times your annual premium, and you usually have only 30 to 60 days after the policy ends to buy it, so decide before you let coverage lapse.

Any firm a client pays for advice, a managed account, or a professional deliverable they then rely on. That includes consultants, advisors, agencies, technology firms, accountants, real estate and property managers, and many licensed professions. The trigger is simple: if a client could lose money because your work was wrong, late, or incomplete, you have an E&O exposure. Many do not buy it until a contract forces them to, because client master services agreements and management contracts routinely require professional liability at a stated limit, with the client named as additional insured, before any work can start.

Two inputs set the number. The first is your largest contract's minimum. Most client agreements begin at one million per claim and aggregate, and institutional clients raise that to two million. The second is what a serious claim in your profession could actually cost, since a firm advising on large transactions can produce a single loss in the millions while a smaller services firm rarely does. Carry the higher of the two. Remember that on most E&O policies defense costs erode the limit, so a one million dollar policy is not one million dollars of settlement money once the lawyers are paid.

Generally no. Standard professional liability forms exclude losses that result from a data breach or cyber attack, including the cost to notify affected clients, run forensics, and defend the resulting privacy claims. Those belong on a cyber liability policy, which is built for exactly that exposure. E&O answers the question of whether your professional advice or work was negligent. Cyber answers what happens when client data is stolen or exposed. A firm that holds sensitive client information typically carries both side by side, because a single incident can involve a professional error and a breach at the same time, and each policy only reaches its own half.