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Texas Department of Insurance
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FAQ: Professional liability insurance

What’s professional liability coverage? 

Professional liability insurance, sometimes called errors and omissions, provides coverage for claims for damages arising from the performance of professional services. 

Why do I need professional liability insurance? 

Professional liability insurance can provide financial protection to you and your business if claims arise from your providing professional services, or your failure to provide professional services.  

What types of damages does professional liability insurance cover? 

Professional liability insurance can help with claim settlements, legal fees, and judgments for claims arising from your professional services. For example, if a claim is made because of a mistake that causes your client to lose money, you’ll be covered for damages. 

Who should have professional liability insurance?

Any business that provides professional services, like childcare, electrical work, air conditioning installation and repair, engineers, lawyers, and IT consulting. You may want to talk to an agent about getting professional liability insurance.  

What’s general liability insurance? 

Commercial general liability insurance protects contractors and business owners from claims such as property damage and bodily injury 

Do I need professional liability insurance if I have general liability insurance? 

You might. The two types of insurance cover different kinds of damage. Read your policy or ask your agent or company what is and isn’t covered.  

Is professional liability insurance required?

Some professions require insurance to get a license. Home day care centers, HVAC installers, plumbers, and real estate inspectors must have professional liability insurance to get a license.

Can a client require that I have professional liability insurance or show them proof I have insurance?

Yes. A person hiring you may require that you have insurance and provide proof of that insurance.

What’s the difference between occurrence policies and claims-made policies?

  • Occurrence policies provide coverage for incidents that happen during your policy period, regardless of when you file a claim.
  • Claims-made policies provide coverage for incidents that happen during your policy period and are reported to your insurance company during the policy period. Incidents that happened outside the policy period or claims reported to the insurer outside the policy period are not covered unless special coverage is purchased or arranged with the insurer.

What’s a premium audit?

Some policies have a condition called "premium audit." Insurance companies use payroll, sales, billable hours, or number of clients to calculate your estimated premium. This is the premium you’ll pay at the start of the policy.

Later, they will look at your business records to see if the actual payroll, sales, billable hours, or number of clients is greater or less than the estimate. They will then charge you more or return some of your premium.

The insurer will usually do an audit after your policy ends but could do one during the policy period. Give the company accurate estimates to avoid paying more at the end of your policy period.

For more information, contact:

Last updated: 5/16/2024