Professional Liability Insurance
What is professional liability insurance?
Professional liability insurance protects a business or individual against claims that their professional work was negligent, mistaken, or failed to meet the client's expectations. It typically pays defense costs and covered settlements or judgments, up to the policy limit. Law firms, consultants, healthcare practices, and accounting firms commonly carry it. Many non-medical professions call it errors and omissions insurance.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that tracks premiums, renewals, and deductibles in the right accounts, so coverage costs are visible in every monthly close.
How the coverage works
- The policy usually covers claims made during the policy period, which is called a claims-made policy
- A deductible or retention is the amount the firm pays before the insurer pays
- The limit is the most the insurer will pay for a claim and in total for the policy period
- Common exclusions include intentional wrongdoing and bodily injury, which general liability or other policies address
How to account for the premium
The figures below are illustrative. A firm pays an annual premium of $9,600 up front. It records the payment as a prepaid expense and recognizes $800 of insurance expense each month. If a claim leads to a deductible payment, the firm records that amount as expense when it is incurred. A probable and estimable loss may need to be disclosed or recorded as a contingent liability.
Frequently asked questions
What is the difference between professional liability and general liability?
Professional liability covers claims that arise from the quality of your professional advice or services. General liability covers physical risks such as bodily injury or property damage on your premises. Most service firms need both, and the policies are written separately.
What does claims-made mean?
A claims-made policy responds only if the claim is made while the policy is active, and often only if the work happened after a set retroactive date. Keeping continuous coverage matters. If a policy ends, ask about an extended reporting period.
This page is general information, not insurance advice. Talk with a licensed broker about your coverage needs.