When Should You Increase Your Professional Liability Coverage?

Professional liability insurance, also known as errors and omissions (E&O) insurance, can cover businesses and professionals against claims of negligence, misrepresentation, or failure to deliver services as promised. This type of insurance may cover legal defense costs, settlements, and judgments that arise from such claims.

What Kinds of Businesses May Need It?

Any business that provides professional services or advice may benefit from professional liability insurance. This can include consultants and advisors, lawyers and accountants, architects and engineers, healthcare providers, IT professionals and software developers, and marketing and creative agencies. Even small businesses or freelancers may face liability risks if their work leads to financial loss for a client.

When Should a Company Consider Increasing Coverage?

A company may want to increase its professional liability insurance coverage under several circumstances:

• Business growth: As a company expands its client base, service offerings, or revenue, its exposure to liability may also increase. Higher coverage limits can help ensure adequate protection.

• Entering new markets or industries: If a business begins serving clients in more regulated or high-risk industries (e.g., finance, healthcare, or construction), it may face stricter standards and greater legal exposure.

• Contractual requirements: Clients or partners may require higher coverage limits as part of service agreements or vendor contracts. Failing to meet these requirements can jeopardize business opportunities.

• Past claims or legal trends: A history of claims or a rise in industry-wide litigation may signal the need for stronger protection. Insurers may also recommend increased limits based on evolving risk profiles.

• Reputation management: Companies that rely heavily on trust and reputation may choose to increase coverage proactively to safeguard against reputational damage from lawsuits.

Increasing professional liability insurance can be a strategic decision that aligns with a company’s growth, risk tolerance, and industry demands. Consulting with a licensed insurance advisor from Action Insurance Company may help determine the appropriate level of coverage. Contact us today to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.