Professional Liability

Is Professional Liability Insurance Right for me?

Do you run a barbershop, hair salon, or other specialized beauty service? Do you provide legal, financial, or consulting services? If your business relies on expertise and professional judgment, professional liability insurance helps guard your reputation and bottom line by covering risks that typical general liability policies exclude.

What risks Do Professional Liability Insurance Policies cover?

Professional liability insurance, also known as errors & omissions insurance, protects your business from lawsuits that arise from professional mistakes, negligence, or failure to deliver promised services. It’s essential for businesses that provide specialized advice, consulting, or services like accountants, doctors and lawyers. Beauty service providers like salons, barbershops, estheticians, and cosmetologists face real risks when a client sues over a haircut gone wrong, a skin treatment reaction, or claims of unprofessional conduct. If your service impacts someone’s appearance or well-being, professional liability shields your business from the financial fallout of those disputes.

government Resources for Professional Liability Insurance

We are always here to assist you at Lanco Brokerage if you have any questions, but we also encourage business owners to bookmark their online state resources regarding insurance information. For New Yorkers, the NY Department of Financial Services – Information for Small Businesses page has info on all different kinds of insurance policies including professional liability insurance. For business owners in New Jersey, visit the New Jersey Office of Property & Casualty page from the New Jersey Department of Banking & Insurance for topics specific to your state.

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FAQs

1.) Does New York or New Jersey require professional liability insurance?

Generally, neither New York nor New Jersey mandates professional liability insurance across all professional categories. However, licensing boards for certain fields do impose requirements. It's important to check with them, or whoever maintains authority in your specific field to see which coverages are required.

2.) What are the differences between occurrence and claims-made forms?

Professional Liability insurance is overwhelmingly written on a claims-made basis rather than occurrence basis. In a claims-made policy, coverage responds only if both the alleged act occurred after the retroactive date and the claim is reported while the policy is in force. If the policy lapses or you switch carriers without securing “tail” or extended reporting period coverage, incidents after the retroactive date but before cancellation may be uncovered if the claim arrives after gap. In occurrence forms, the act itself triggers coverage, regardless of when the claim is filed. These are rare in professional liability lines due to open-ended exposure.

3.) What exactly is a “retroactive date” and “tail coverage,” and how do they work?

The “retroactive date” in a claims-made professional liability insurance policy is the earliest date where incidents are covered. The policy excludes any act that occurred before that date, even if you report it during the active period. “Tail coverage” (also called extended reporting period) allows covered acts that occurred before policy expiration to be reported after cancellation and still trigger coverage, so long as they occurred after the retroactive date. Without tail, you lose that protection.

4) How do limits and deductibles work in professional liability policies?

Professional Liability insurance typically features an aggregate limit, which is the maximum the insurer will pay across all claims during the policy period, and a per-claim limit. An example could be $1 million per claim and $3 million aggregate. You pay a deductible before your insurer covers any costs after a claim. Evaluating policy limits involves assessing the severity of potential loss, client expectations, hospital or contract requirements, and worst-case legal exposure scenarios. If you stay underinsured, you risk catastrophic financial loss.