Professional liability insurance protects small business owners against the cost of lawsuits over unsatisfactory work. Although not required by state law, it's strongly recommended for professional service providers in Texas.
Professional liability insurance, also called errors and omissions insurance (E&O), covers the cost of lawsuits related to the quality of your work, including legal fees and settlements.
It covers the following types of customer claims for Texas businesses, which makes it a key part of any risk management strategy:
Texas law does not require physicians to carry malpractice insurance. However, they may need this coverage to work in a specific hospital or other medical facility.
Any business that provides a professional service or expert advice should carry professional liability coverage, as a client could sue if your service or advice causes accidental harm. Even an unwarranted lawsuit can be expensive, between attorney’s fees, court costs, or a settlement.
Industries often at risk for professional liability claims include:
IT consultants and other tech professionals are susceptible to lawsuits related to system downtime, data breaches, missed deadlines, and errors. Tech professional liability insurance, which is referred to as errors and omissions in this industry, can be bundled with cyber insurance into one policy — tech E&O — to protect against all of these risks
Those who work in building design, such as architects and engineers, are at risk of a lawsuit if a client accuses them of making a costly mistake. For example, a bridge could develop cracks over time, or a project could be delayed for months due to unforeseen circumstances.
Insurance professionals, including agents and insurance brokers, often deal with large amounts of financial data and must use their best judgment in advising their clients. If a client doesn’t have enough coverage, or the right type of coverage, they might blame their agent or the insurance agency for failing to make sure they were protected.
Even if you’ve done nothing wrong, a disgruntled customer might file a lawsuit if your advice leads to a financial loss.
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Texas law doesn't require most small business owners to have a professional liability insurance policy. However, you might need this coverage to sign a contract, rent a commercial space, or get a license in your field.
Professional liability is referred to as medical malpractice insurance when it applies to doctors and other healthcare professionals, such as therapists. Texas law does not require physicians to carry malpractice insurance. However, they may need this coverage to work in a specific hospital or other medical facility.
For example, Baptist Medical Center in San Antonio, Ben Taub Hospital in Houston, and St. David's Medical Center in Austin all have specific requirements for how much malpractice insurance physicians must carry to gain admitting privileges.
Because Texas has a cap on damages from malpractice insurance, you may not need as much coverage as in other states.
Though E&O insurance is not required for Texas real estate agents, some states require agents and brokers to carry it.
For lawyers, professional liability is also known as legal malpractice insurance. Texas doesn't require attorneys to carry legal malpractice insurance or disclose their insurance status.
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Get professional liability insurance to protect yourself from claims that you didn't deliver on a deadline, or made a costly mistake.
Some clients require you to have this policy. It can protect you from expensive lawsuits for only about 60 dollars per month.
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The average cost of professional liability insurance is $61 per month nationwide. In Texas, the average cost is $71 per month.
The cost of professional liability coverage depends on several factors, such as:
Professional liability insurance covers your legal defense costs if you’re sued for a mistake in your professional work, and it can be affordable for small businesses in Texas.
Even if you’ve done nothing wrong, a legal battle can be expensive. In addition to your attorney’s hourly rate, you’ll likely be charged for administrative costs such as copying, filing, and travel expenses. You may also have to pay for expert witnesses to testify on your behalf, a court-ordered legal judgment, or a settlement to avoid trial.
Professional liability insurance covers all of the above, up to the coverage limits of your policy. The policy limits you choose should take into account how expensive it can be to fight a professional liability lawsuit. You also need to determine the amount of coverage required to work in a certain field or obtain a contract.
Since professional liability insurance is a claims-made policy, continuous coverage is key. In order to file a claim, the policy must be active both when the claim is filed and when the incident occurred.
A professional liability policy covers a wide range of lawsuits, but won't cover intentional harm you cause to others. Most insurance companies exclude:
General liability insurance doesn’t include professional liability coverage. General liability covers common business risks and liability claims such as customer injuries, customer property damage, and advertising injuries.
If a customer falls and suffers an injury at your workplace, it would be covered by your general liability policy, including any legal defense costs. If someone sues you over unsatisfactory work, it would be covered by your professional liability coverage.
General liability and professional liability are often the first policies bought by small business owners. However, they aren’t the only types of insurance you might need.
Workers’ compensation insurance covers work-related injuries and illnesses. While it's optional for Texas businesses, many choose to carry this coverage to protect against costly accidents.
Commercial property insurance is a type of property and casualty (P&C) insurance that covers your business’s physical location and equipment. It’s often required to sign leases.
A business owner’s policy (BOP) combines general liability coverage and commercial property insurance. It’s usually less expensive than buying each policy separately.
Commercial auto insurance is required in Texas for any vehicles used solely for work purposes.
Cyber insurance covers the cost of dealing with a data breach or malicious software attack.
Employment practices liability insurance (EPLI) is a type of management liability insurance that protects against legal expenses related to claims of harassment, discrimination, wrongful termination, and other violations of employees' rights.
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Professional liability and errors and omissions insurance both protect businesses from expensive lawsuits caused by unsatisfactory work. The language used may differ by industry.
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Once you find the right small business insurance, you'll have active coverage and access to your certificate of insurance, typically in less than 24 hours.
