What is Professional Liability Insurance—and is it Worth it?
As a professional services business owner, you may be wondering if professional liability insurance is worthwhile. The truth is, no matter how careful you are—or how good you are at your job—mistakes happen. It’s part of being human. Without insurance to cover those human errors, you may be exposing yourself and your business to significant risk.
Let’s delve in and explore the issue further with answers to some of the most common professional liability insurance questions.
How Does Professional Liability Insurance Work?
Also known as Errors & Omissions (E&O) insurance or malpractice insurance, professional liability insurance is supplemental liability coverage that protects you against catastrophic loss in the event of a lawsuit due to a negligent act, misrepresentation or inaccurate advice. Professional liability insurance is specialty coverage, which means it’s not provided under homeowner endorsements, in-home business policies or business owners policies.
What Does Professional Liability Insurance Cover?
Professional liability insurance will cover attorney fees and other legal expenses, settlement costs and fees and other expenses related to a judgement for things like:
- Work mistakes
- Undelivered services
- Missed deadlines
- Breach of contract
What Occupations Would Benefit from Professional Liability Insurance?
Any professional who regularly gives advice or offers professional services directly to a customer would benefit from a professional liability policy, including:
- Consultants and contractors
- IT providers
- Teachers and trainers
How Much Does Professional Liability Insurance Cost?
The cost of a professional liability insurance policy varies by industry, probability of risk and frequency and severity of claims brought against the different professional industries. For example, lawyers can receive claims just as quickly as they represent them, putting them in the high-risk category. For lower-risk companies, some insurance carriers will add professional liability coverage onto their package policy for a few hundred dollars, while higher-risk businesses would need a separate policy. In this case, your carrier will require you to complete a full application so they can evaluate your specific exposure and calculate your rates.
What Other Factors Affect the Cost of Professional Liability Insurance?
In addition to risk level and industry, the business’s size also comes into play with professional liability insurance. The bigger the company, the bigger the premium. The fact is, larger companies have more employees (increasing the likelihood of human error) and more clients (increasing the odds of a claim). If a claim is brought against your business, even if you did everything correctly, your carrier will still need to defend the claim, which can cost thousands.
Is professional liability insurance worth it? In short, yes. Without it, you expose yourself and your business to costly and potentially detrimental risk.
By working with a knowledgeable insurance agency that has experience with different professional industries, and access to multiple insurance carriers, you’ll be poised to get the best coverage at the most competitive premium.
Contact us to get a professional liability insurance quote or for more information.