Professional liability insurance covers legal costs due to professional mistakes. Any business that provides professional services is strongly encouraged to get this coverage. Your industry and the scope of your services affect the cost of this policy.
Regardless of insurance policy limits, the median cost of professional liability insurance for a small business is $59 per month ($708 annually). The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of business insurance because it excludes outlier high and low premiums.
About half of small business owners (51%) pay between $500 and $1,000 per year for their policies, and almost one in five (18%) pay less than $500. These figures were derived from an analysis of thousands of insurance policies purchased by TechInsurance's small business customers.
Your type of business and the industry you work in have a significant impact on the cost of professional liability insurance, since different professionals are exposed to different liabilities. On average, higher risk industries pay higher premiums, while low-risk industries enjoy lower rates.
For example, a project manager whose project is expected to increase company revenue will likely pay a higher premium for their professional liability insurance policy. So might a cybersecurity professional responsible for another company’s data security.
The cost of professional liability insurance also depends on the specifics of the policy. For example, a professional liability policy that includes cyber liability insurance will cost more since it includes coverage for data breaches.
If you want a professional liability insurance policy that pays out more per incident or per year, you’ll need to increase your amount of coverage – which means you’ll pay a higher premium to your insurance company.
The limits on professional liability policies vary significantly, from $250,000 to $2 million. Most TechInsurance customers (61%) purchase a $1 million / $1 million professional liability policy. This includes:
There are several things you can do to keep your professional liability insurance costs low. Let's take a look at some strategies.
You can choose to pay your insurance premiums once a month or once a year. While making a smaller payment each month requires less money up front, it may cost more in the long run since insurers often offer discounts to businesses that pay an annual premium.
While it’s possible to purchase professional liability coverage when you start a project and drop coverage when you complete the project, this cost-cutting strategy can backfire. To collect insurance benefits, your “claims-made” professional liability policy must be active:
Continuous coverage is key if you don't want to pay out of pocket for professional liability lawsuits.
Small businesses with no previous claims on their insurance can expect to pay less for business insurance. You can avoid claims with a risk management plan for professional liability exposure and cybersecurity threats. That could include:
Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific policy.