Professional Liability Insurance for Contractors

Professional liability insurance for contractors protects against claims of negligence, design errors, misrepresentation, or incomplete work that cause financial loss to clients. It covers legal defense, settlements, and damages, ensuring contractors are financially protected.

What Is Professional Liability Insurance for Contractors?

Professional liability insurance, often called contractors’ errors and omissions (E&O) insurance, is a specialized coverage that safeguards contractors when a client claims financial loss due to mistakes, omissions, or negligence in their professional services.

Unlike general liability insurance, which covers physical injuries or property damage, professional liability focuses on financial and reputational risks stemming from your professional work.

Why Contractors Need Professional Liability Insurance

Even highly skilled contractors can face unexpected legal disputes. A simple oversight, design flaw, or client misunderstanding can lead to lawsuits costing tens of thousands of dollars.

Key reasons contractors need this coverage:

• Protection against negligence claims – Covers legal defense if your work is accused of being incomplete, incorrect, or misleading.

• Financial security – Pays for settlements, damages, and court fees.

• Credibility boost – Many clients require proof of professional liability insurance before awarding contracts.

• Peace of mind – Reduces the stress of potential disputes and legal costs.

What Does It Cover?

Contractors’ professional liability insurance typically includes:

• Negligence or errors in project planning, advice, or execution

• Design mistakes that cause financial loss to the client

• Missed deadlines or incomplete work leading to losses

• Misrepresentation of qualifications, scope, or project outcomes

• Legal defense costs, settlements, and judgments

What It Doesn’t Cover

Professional liability does not cover:

• Bodily injury or property damage (covered by general liability insurance)

• Intentional wrongdoing or fraud

• Employee injuries (covered by workers’ compensation)

• Damage to company property

Cost of Professional Liability Insurance for Contractors

The cost varies depending on your trade, business size, and project risks. On average, contractors pay between $900 and $2,500 per year for professional liability insurance. High-risk fields like engineering or design-build may pay more.

Factors influencing cost:

• Type of contracting services offered

• Project size and complexity

• Business revenue and employee count

• Past claims history

• Coverage limits and deductibles

Best Practices for Contractors When Choosing Coverage

1. Bundle policies – Pair with general liability for complete protection.

2. Choose adequate limits – Minimum of $1M coverage is common, but larger projects may require $2M–$5M.

3. Review client contracts – Ensure coverage matches client requirements.

4. Work with an independent agency – They can compare multiple carriers to find the best deal.

FAQ: Professional Liability Insurance for Contractors

1. Is professional liability insurance the same as general liability insurance?
No. General liability covers physical injuries and property damage. Professional liability covers financial losses from mistakes or negligence in your work.

2. Do small contractors need this insurance?
Yes. Even small contractors can face costly lawsuits from a single project error or client dispute.

3. Is it required by law?
It’s not legally required in most states, but many clients, lenders, and project owners demand proof of coverage.

4. How much coverage should contractors have?
Most start with $1 million, but larger contractors or those handling government/commercial projects often need higher limits.

5. Does it cover subcontractors?
Subcontractors usually need their own coverage. However, some policies allow adding them as insured parties.

Final Thoughts

For contractors, professional liability insurance is not optional—it’s essential. Lawsuits can happen even if you’ve done everything right. Having the right coverage ensures your business, reputation, and finances are safe.

At THAgency, we search through nearly 100 insurance carriers to guarantee the best price for the best coverage tailored to your needs.

👉 Start now and see your options instantly. Get your personalized quote today. It’s fast, secure, and tailored to you.