How to Protect Your Small Business From Lawsuits With Professional Liability Insurance

May 17, 2024 | Professional Liability

This article was originally published November 10, 2021

To understand how to protect your small business from lawsuits by investing in professional liability insurance, you first need to understand why you need it. People who make a living providing professional advice or services to clients are required to adhere to certain standards and best practices for their industry. If that describes you or your company, you could potentially be at risk if a client you work with feels you made a mistake that affected them adversely. They may then decide to sue you. For the financial damages they believe were caused by your error. Insurance for lawsuits is, therefore, very important.

Professional liability insurance, also known as business lawsuit insurance, errors & omissions, or E&O insurance, is designed to protect you from this type of situation. It covers factors such as oversights, negligence, and errors. With any of these issues, professional liability insurance from biBERK can cover the cost of your legal defense and any damages awarded to the person or company suing you. biBERK can also cover what are called punitive damages, if permitted by law in your state. 

Punitive damages can be very high, as they are assessed by courts on top of other damages in order to further punish the party that is alleged to be at fault. If your state allows these damages to be covered by an errors & omissions insurance policy, biBERK can cover you up to the policy limit. In addition, biBERK provides an attorney to represent you, which means you don’t have to go through the hassle of finding one for yourself.

What if the suit brought by your client is frivolous, meaning that their allegations are completely false? Does professional liability insurance protect your business from meritless lawsuits? In short, the answer is yes, it can. Professional liability insurance can protect you from the financial repercussions of both actual and alleged errors and omissions. So, whether you made a mistake or the client is simply saying that you did, biBERK is there for you and can provide professional business lawsuit insurance.

Individuals discussing liability insurance

What Does Professional Liability Insurance Cost?

Professional liability insurance policies from biBERK start at around $300 annually and can go up into the thousands. Your exact professional liability insurance cost (which you can get in a fast, free online quote) is based on a number of factors, including your industry, the level of coverage you choose, how long you’ve been in business, how many employees you have, your annual revenue, and the policy limits you need. 

Consider the costs of insurance for lawsuits as an investment that helps protect your business, so it’s worth every penny. However, there are ways to help reduce the amount you pay for insurance. These include:

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    Buying the right amount of coverage. The higher the amount of coverage you require, the higher your premiums will be. For example, all other factors being equal, $500,000 in coverage will cost less than $2 million in coverage. If $500,000 will cover any type of incident a business like yours can reasonably expect, that might be the right amount for you. Our licensed insurance experts can help you determine the amount of coverage you need.
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    Choose a higher deductible. Just as with other types of insurance, higher deductibles mean lower premiums. If you do select a higher deductible, you need to be sure you can afford to pay that amount if an incident occurs.

What Isn’t Covered by Small Business Professional Liability Insurance?

Small business professional liability insurance from biBERK provides excellent coverage. However, there are certain things that aren’t covered by this type of policy. 

For example, professional liability insurance for lawsuits doesn’t cover warranty or product guarantees your company makes. It also doesn’t provide coverage when a client simply is unhappy with the work you did, rather than claiming an error or omission was made. 

Other coverage exclusions include:

  • Illegal acts or costs of defense for criminal prosecution. Professional liability insurance protects your business from risks resulting from unintentional, honest mistakes. Intentional or illegal acts are not covered.
  • Common accidents not related to your expertise. Things like slip-and-fall injuries are not related to your professional advice or services, and are not covered by professional liability insurance. You need a general liability policy for those types of risks.
  • Employee injuries and associated costs. Workers’ compensation insurance can cover medical bills and lost wages in the event of an on-the-job injury.
  • Damages to property your business owns. In order to protect your company’s physical assets like tools, computers, etc., you need a business owners policy or BOP (also called property & liability insurance).
  • Cyber liabilities. Standard professional liability insurance doesn’t cover things like data breaches. However, you can purchase a cyber liability insurance add-on for your policy.

Who needs professional liability insurance to Protect Against Lawsuits?

Professional liability insurance can provide important protection for professionals in a wide range of industries, including:

  • Business consultants
  • Journalists
  • Insurance agents
  • Certified financial analysts
  • Lawyers
  • Bookkeepers
  • Real estate agents/brokers
  • Veterinarians
  • Barbers and beauticians
  • Marketing/advertising consultants
  • Architects and engineers
  • Dog groomers
  • Home inspectors
  • Training consultants

This is just a small sample. If you feel that your business provides professional advice or services, our licensed insurance professionals can help you determine if you need professional liability insurance to help protect against lawsuits.

Get Your Professional Liability Coverage from biBERK

If you want to know more about how to protect your small business from lawsuits, contact biBERK. We work directly with our customers—no brokers or middlemen. As a result, you can save up to 20% over other providers. Plus, you get the confidence of working with a company that’s part of Warren Buffett's Berkshire Hathaway Insurance Group with millions of satisfied customers, more than 75 years of insurance experience, and billions in paid claims annually.