Cost of Professional Liability Insurance

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What Professional Liability Insurance is All About:

Professional Liability Insurance is one of the most common insurance types a business can buy. Also known as Errors & Omissions Insurance, this insurance policy provides coverage for just that: errors and omissions.

In this case, “errors and omissions” are typically defined as a mistake either you or someone who works for you might make when attempting to provide a service. A mistake is often chalked up to negligence; wherein your business has failed to meet a customer’s desired standards. Important to this type of insurance is a loss on the part of the client. This means that your company’s failure to provide contracted services correctly, whether due to an error in the advice given to a client or a seeming oversight, must have resulted in financial loss to the client.

Who Needs It?

Most industries could use some form of Professional Liability Insurance. However, many businesses within the service industry purchase this insurance at a higher rate. Industries where this insurance is very common include:

  • Finance and Accounting
  • IT/Technical
  • Legal
  • Architectural and Design
  • Management Consulting
  • Engineering Services

How Much Does Professional Liability Insurance Cost?

The cost of Professional Liability Insurance varies according to industry and business size, but a key variable is the amount of coverage your company decides to purchase. Most small businesses can expect to pay between $1,000 to $3,000 per million dollars of coverage annually, or $83 to $250 per month, according to Trusted Choice.

Generally, the smaller your company, the lower your insurance costs will be. In the retail industry, your company will typically be considered a “small business” as long as your annual revenue is somewhere under $7.5 million. As the average annual revenue for U.S businesses was about $1.1 million in 2007, according to the Small Business Association, chances are your small business will receive very reasonable rates for Professional Liability Insurance.

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What Goes Into Pricing?

Costs for this type of insurance can vary depending on a number of different factors. This can include the type of service you provide and to what industries, the size of your business (often based on revenue) and where your company is located. Remember: The smaller your business and the lower your revenue, the less you can expect to pay. If you decide to pick a plan with a higher deductible, this will inevitably place more risk on your business, but will result in a lower premium.

You may often find benefit from an insurance company if you employ good risk management strategies. This can include company-wide training sessions, enacting written and enforced safety procedures, and emphasizing experience when making hiring decisions for new employees. This puts your company at a lower risk for making mistakes and makes you a better candidate for a lower premium.