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What is professional liability insurance and why do you need it?

One question people ask me a lot is: what is professional liability and what does it cover?

Professional liability is like a general liability policy for industries that provide service and/or advice.

It is also commonly referred to as errors and omissions insurance.

Whereas a painter would need a policy to cover them for property damage or bodily injury for their negligence, an attorney would be more interested in having a professional liability policy that would cover them from being sued for giving harmful or damaging advice.

This is not to say that a general liability policy should not be chosen in addition to a professional liability policy for these service industries. In some cases, especially when there is an office where customers visit, a general liability policy should also be considered.

Professional liability policies not only pay out for any awarded damages to another party but they can pay your cost of defense in these situations as well. So even if a suit is unwarranted, the cost to defend yourself can cripple your business if you don’t have a policy in place to protect you for this.

What is a retroactive date?

Professional liability policies are on a claims made basis. What this means is that your policy would cover any losses that arose during that policy period only. A retroactive date can be used on these policies that will go back to the original date you began your business.

What this means is that if your policy is in effect from 04/01/2014-04/01/2015, your expiring policy would no longer be on the hook for any claims made after that expiration date of that policy. If you moved to another insurance company that began on 04/01/2015, they would pay out on any claims made after 04/01/2015. If you started your business in June of 2003 than that would be your retroactive date on your policy so any losses during that policy term would pay out for any errors that occurred since your policy began. This is why your rates for errors and omissions policies increase the longer you are in business.

What types of industries need professional liability or errors and omissions policies?

Insurance agents

Medical professionals



Financial advisors



Software developers

Website developers


Real estate agents


Property managers

If you have any questions as to what policy is best for your business please give us a call at 704-494-9495 and we would be happy to discuss any questions you may have.