How to Choose the Right Professional Liability Insurance Limits 

As a professional, liability insurance is a no-brainer. Your business is far too precious to even consider leaving it exposed, which is why many professionals choose to – or are required to – purchase professional liability insurance as part of a comprehensive business insurance policy.  

Once you’ve selected and built your business owners’ policy, now you must decide exactly what your limits should be for each coverage. This is probably one of the most difficult things about tailoring a customized insurance package; without the expertise of an insurance expert, you could be left floundering. Not to worry. Bullfrog is here to help you. 

What is professional liability insurance? 

In essence, professional liability insurance, also sometimes called errors and omissions or “E&O” insurance, is a type of insurance policy designed to cover your business if a client claims financial loss due to a professional service or advice you provide. Here’s a quick explanation of what professional liability insurance actually is before we get into how to choose your policy limit. 

E&O, or professional liability insurance, can help your business cover any consequential legal expenses if you are sued by a client as a result of their actual or even just alleged financial loss due to your failure to provide a promised service or an error in the offering of that service. This includes costs such as settlements, defense costs, and judgement awards. Your professional liability insurance, to note, will not cover intentional harm or criminal activities, but it can cover errors, negligence, misrepresentation, libel/slander, loss of documents, project delays, inaccurate advice, and more. 

What are policy limits? 

Each policy will have a policy limit, which is essentially the maximum amount you will be paid if there is a covered claim. Unfortunately, no policy has an “infinite cap” wherein you can be making claim after claim without it hitting any sort of maximum. For professional liability insurance, there’s typically a cap that exists for the entire year – so you could make multiple claims in one policy term so long as those claims didn’t exceed the maximum policy limit. 

As an example, if you filed a claim for one lawsuit that was covered and your insurance company paid out the entirety of the lawsuit, a second lawsuit might exceed your policy limits – but you’d have as much coverage for it as you had remaining in your maximum payout amount. Still, the remaining amount would have to come out-of-pocket. Therefore, it’s critical as a business owner to have the right amount of coverage to protect your business. Without enough coverage, your business might not have the financial muscle it needed to recoup from a terrible loss. 

How do I choose the right policy limit? 

Each insurance company may offer different policy limits for professional liability insurance. You could choose between $1,000,000, $2,000,000, and onward. But choosing the right amount is critical; insuring your business for $5,000,000 professional liability insurance is more expensive than insuring it for $1,000,000, so you’ll want to make sure you aren’t over-insuring – just as much as you want to make sure you aren’t underinsuring. Sounds overwhelming? It doesn’t have to be! 

When choosing the right policy limit, you’ll want to consider a few major factors. 


Consider, first, your industry. Every industry faces different risks and exposures. Some industries will also see lawsuits more commonly than other industries. Make use of the professionals you know within your industry to discuss information on the kind of protection that they have acquired or enlist the assistance of a broker like EasyCover Insurance Broker in Canada to gauge an idea of the risks and what coverage is most common in your industry. 

Contractual Requirements 

In Canada, some contracts will require you to carry a certain amount of professional liability insurance. With these conditions, you’ll really have no choice but to follow the requirements of whatever contract you enter. Common requirements are $1,000,000 or $2,000,000 liability insurance. 

Your Clients 

You’ll want to consider how many clients you have, how big they are, and the industry that they operate in when determining your limits. The value of your contracts will really impact how much coverage you will actually need. The more clients and the bigger that they are, the more coverage you should purchase. Generally, this increases the chances of an expensive lawsuit. 

Average Cost of Lawsuits 

This sort of ties in with industry as well but take a look at the commonalities for lawsuits in your industry. How often do they occur? How much do they typically cost? If you aren’t sure, consult with a broker and ask them to help you determine your risk level as well as select the right policy limit. You may also want to consider how much your business may be able to afford out-of-pocket. Chalk up a scenario where the worst thing possible occurs and gauge your limits based on that. 

Your Business 

What about the individual factors of your own business? What risks are unique to your business? If you work with a particular client or take on certain specialty projects, you may need to do some additional evaluation to gauge your policy limits. 

EasyCover can help 

Most professionals will benefit for at least $2,000,000 in professional liability insurance protection. Lawsuits can be very expensive (consider that the average cost a lawyer will bill per hour is $400-$600!) and you wouldn’t want your business to be left floundering and having to pay out-of-pocket.  

EasyCover’s brokers understand the needs of professionals and can help you determine an accurate amount of professional liability insurance for your business. Check out EasyCover  by giving us a call or apply for a free quote to begin the process of finding comprehensive insurance fitted to your business today. There is hassle, no bull, and you can n purchase your insurance in just a few minutes.