How Much Does a Professional Liability Insurance Cost?

Are you an IT consultant, a mental health counselor, a career coach or a personal trainer? Are you in the field of real estate or salon? Or maybe you’re a travel agent, an architect, an engineer, or dentist?  Perhaps you’re an accountant, a veterinarian, or a business consultant?

If your profession is any one of these, then you might be at more risk than you think – the risk that could potentially damage your career and business altogether. But there’s a way to prevent that, and that’s through having a Professional Liability Insurance. But what are Professional Liability Insurance rates nowadays? Let’s find out!

Average Cost of Professional Liability Insurance

A Professional Liability Insurance, or also known as Errors & Omissions Insurance, is a policy to protect people who earn through their expertise. Think of it this way, you can’t always have happy and contented clients, no matter how hardworking, dedicated and knowledgeable you are. You can’t always avoid mishaps and gaffes. And when that happens – when a client sues you over mistakes that cost them money, or when your work does not deliver well on your promises or a client does not think you’ve met the industry standard, your Professional Liability Insurance will be the one to cover the cost. To understand more about what it is and how it can help you, Amazon offers a unique guide on insurance for entrepreneurs at a very affordable price.

Small business lawsuits can cost somewhere between $3,000 and $150,000. And in a time where lawsuits are filed left and right, the best way to protect you and your business is through an insurance that can save your time and hard-earned money. And as of writing, the average Professional Liability Insurance cost in the United States for small businesses is $270 to $3,000 annually.

Liability Insurance illustrated

What are Included

Typically, a Professional Liability Insurance covers an attorney’s fee, defense costs, and court costs, regardless of who’s at fault. Also, if you have been accused of breach-of-contract for not accomplishing your project by a certain date and cause your client to go over budget, you may make amends and agree to a settlement, which is covered by your insurance as well.

In circumstances when you lose in court, your client may be awarded damages which you will be required to pay for. And payment for judgment is already included.

Shopping for Professional Liability Insurance

If you’re wondering where to get insured, there are several companies that offer quality service along with reasonable Professional Liability Insurance rates. And to state a few, here are some companies you may consider:

  • AIG: Equipped with more than 30 years of experience in professional liability, AIG offers competitive prices and services. Along with assisting in legal matters, they can also help you with your reputation and protect you from cyber risk exposure (applicable to businesses that involve security of data and technology)
  • GEICO & Hiscox: These two companies have partnered together to bring you one dependable and affordable coverage. Unlike other companies, their insurance covers work done by your employees, staff, and subcontractors. In addition, it covers the past works you’ve done even before you were insured. And their rates start as low as $270 a year – which you can also immediately buy at this very moment, online!
  • Insureon: An A+ rated company and serving more than 200,000 businesses, Insureon provides insurance services that are hard to match. Their average Professional Liability Insurance cost starts from $600 a year to $1,736.
  • BizInsure: Working together with top insurance companies, BizInsure is a great place to start comparing prices and coverage, and learn what insurance to get and where to get it from. To give you an idea, the lowest price they can find for you is at $564 per year.
  • Trusted Choice: To help you choose the right insurance for your business, Trusted Choice– a group of independent insurance agents – can assist you by building you a coverage plan that is personalized according to your needs. Or, they can advise you and search for multiple insurance quotes that can fit well within your budget.

Factors Affecting Cost of Professional Liability Insurance

Now, there are actually quite a lot of factors that affect Professional Liability Insurance rates. And it is important that you understand each before applying for one.

  • Your Profession or Industry. Your profession and industry are big factors in determining how expensive your insurance can get. Jobs with more risks or responsibilities will usually mean higher rates. For example, a low-risk business like an accounting firm will definitely pay lower than a construction company, where potential risk exposure is much higher.
  • The more you have to protect, the higher the cost will be. So, let’s say your business earns $50,000 a year, your insurance rates are guaranteed lower compared to a business that makes more than $750,000 annually.
  • Size of your Company. Normally, the smaller your company is, the lower insurance cost you’ll have to pay. And often, determining the size of a business depends on the number of employees and annual revenue. According to the U.S Small Business Administration, a company may be considered a “small business” if there are not more than 500 employees and if the annual revenue is under $7.5 million.
  • Limits of Liability. See, all policies have certain coverage limitations and any amount over that limit will be your responsibility. And the higher the limit of liability you opt to have, the higher the premium prices you have to pay. For example, at Insureon, if you choose a policy that covers up to $250,000 for a claim, you will have to pay around $506 a year. Naturally, when you choose to have a higher coverage limit then you would have to pay more. A $1,000,000 limit will cost you around $1,316 per year.
  • Similar to medical and car insurances, a Professional Liability Insurance cost can be higher if there are lower deductibles. But if you choose a higher-deductible policy, the cost will decrease as well.
  • Geographic Location. Insurance costs are likely to be lower in small cities. If you’re an IT consultant in Montana, you’ll probably get low insurance quotes. But, with the same business at a bigger city like Los Angeles, California, or New York, New York, the price quote will be significantly higher.
  • Risk Management Procedures. Having good risk management strategies could get you a lower insurance deal as this puts your business at lower risk for making mistakes. Examples of these are training sessions, enacting written and enforced safety procedures, and being extremely cautious of work experience when hiring new employees.
  • Liability Claims History. Your past liability claims will be considered in determining your insurance rate as well. Even just one severe claim history can end you up with a very high expense. And if you have multiple claims prior, then expect to pay even higher.

Whether you’re a lawyer, consultant, contractor, broker, financial adviser, or in any profession that offer advice, expertise, and service rather than physical goods, always remember that having the right Professional Liability Insurance is a must. Aside from the cost, consider the various factors that make the insurance great. And before purchasing, ask yourself: will it provide the amount of coverage a practitioner in my particular field should carry?

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