Professional Liability Insurance

Frequently Asked Questions

Who needs professional liability (E&O) insurance?

Anyone giving professional advice or services for a fee: consultants, accountants, real estate agents, IT firms, marketing agencies, designers, financial advisors, and architects. Required by law for many professions including doctors, lawyers, and CPAs.

How much does professional liability cost?

Insureon: median small business E&O cost is $61/month ($732/year). High-risk professions: financial advisors $1,500-$5,000/year; doctors $7,500-$50,000+ depending on specialty (OBGYNs and surgeons highest).

What's the difference between GL and professional liability?

GL covers physical injuries and property damage; professional liability (E&O) covers financial losses from your professional advice or service errors. A consultant whose advice causes a client to lose $500K would file an E&O claim, not GL.

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How This Calculator Works

This tool estimates the annual premium for Errors & Omissions (Professional Liability) insurance - the policy that defends and pays claims when a client alleges your professional advice or services caused financial harm. You pick your profession, then enter revenue, number of licensed professionals, years of experience, recent claims, coverage limits and deductible. The calculator starts from a profession-specific base rate and applies a series of multipliers, then reports your annual and monthly premium, premium as a percent of revenue, cost per professional, and an estimate for tail coverage.

Formula

Premium = base rate × revenue mult × employee mult × experience mult × claims mult × limit mult × deductible mult, floored at $300. The revenue multiplier scales with the log of revenue above $250K; each professional beyond the first adds 18%; experience earns credits at 5, 10 and 15+ years; each prior claim raises the rate sharply (one claim ×1.55); higher limits and lower deductibles raise the premium. Estimated tail coverage = premium × 2.

Worked Example

A management consultant (base $1,500) with $250,000 revenue, 2 professionals, 5 years' experience, no claims, $1M/$1M limits and a $2,500 deductible: revenue mult = 1.0, employee mult = 1.18, experience mult = 1.0, claims mult = 1.0, limit mult = 1.0, deductible mult = 1.0. Premium ≈ 1,500 × 1.18 = $1,770 per year, about $148/month, or roughly 0.71% of revenue.

Common Mistakes

Assuming general liability covers professional mistakes - it does not; only E&O responds to negligence claims.

Letting coverage lapse - E&O is claims-made, so the policy in force when a claim is reported must be active.

Switching carriers without matching the retroactive date - that opens a dangerous coverage gap.

Forgetting tail coverage at retirement or sale - budget 1–3× your last annual premium.

Under-reporting revenue or staff to lower the quote - misstatements can void a claim.

Tips & FAQ

What drives my rate most? Profession and specialty, followed by revenue, headcount and claims history. How can I lower it? Use written engagement letters, document scope changes, take risk-management CE courses, and raise your deductible if you have reserves. What is a claims-made policy? One that pays based on when a claim is reported, not when the work occurred. Why does state matter? Tort environments and damage caps vary widely - e.g. California's MICRA lowers medical premiums.

Professional Liability Insurance

Frequently Asked Questions

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