Professional Liability Insurance: What Every Business Owner Needs to Know

We all know that to err is human. But when it comes to your business, human error can result in major liability issues. This is why professional liability insurance, also called errors and omissions insurance, is essential for business owners in many common professions.

Common Mistakes Can Become Costly Lawsuits

Imagine you miss a deadline, give advice that turns out to be bad or forget to file an important form. If your mistakes results in financial loss for your client, you could be sued. This is why professional liability insurance is important.  

And don’t assume that you’re covered for professional liability claims because you have general liability insurance. Although they both deal with types of liability, professional liability insurance and general liability insurance differ significantly. If you have both types of exposures, you need both types of insurance.

  • General liability insurance covers claims related to third-party property damage and bodily injury, as well as some advertising injuries. If a customer trips and falls on your property, for example, or if an employee damages a customer’s property, general liability insurance coverage can kick in.
  • Professional liability insurance, on the other hand, covers losses stemming from professional services. These claims may include errors and omissions and undelivered services. If you experience a covered claim, your professional liability insurance policy will pay for legal costs, up to the policy limit.

As with all coverage types, details can vary significantly from policy to policy. It’s important to read your policy carefully and to understand what’s covered. Common exclusions include criminal or intentional acts.

Professionals Need Professional Liability Insurance

For some professionals, professional liability insurance is required. For others, it’s simply a smart idea.

In many states, doctors are required to carry professional liability insurance. In this case, professional liability insurance is typically referred to as medical malpractice coverage. State laws may also require lawyers to carry professional liability insurance.

People in other professions may also be required to carry professional liability insurance, although not necessarily by the state. Clients and business partners may also require coverage. This mean that if you want to sign with a big client, you may be contractually obligated to purchase and maintain coverage. This requirement protects both you and your client in case anything goes wrong. 

The Insurance Information Institute recommends professional liability insurance coverage for many professions, including accountants, architects, engineers, graphic designers, IT consultants, insurance professionals, investment advisors, management consultants, real estate agents and brokers and software developers.

If you provide professional services, and if those services could potentially result in a loss for your clients, you should consider professional liability insurance coverage.

Protecting Your Business from Lawsuits

Everyone makes mistakes from time to time. Unfortunately, a single mistake may be all that is needed for an expensive lawsuit. Without adequate insurance coverage, one small mistake could put your entire business in jeopardy.

Lawsuits are a common occurrence in the United States. If a client sues you, the following legal battle can be costly and time-consuming. To reduce the risk posed by lawsuits, it’s important to follow high standards of professionalism and consistent documentation. It’s also important to carry professional liability insurance. Get a quote today!

Sources
  • https://www.iii.org/article/professional-liability-insurance

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