Professional liability insurance is also referred to as professional indemnity or errors and omissions insurance and has been created to protect businesses and service providers from the cost of dealing with negligence lawsuits and other claims related to errors during job performing.
Who needs professional liability insurance?
Every business and service professional providing expert advice and service should be covered by this type of insurance. For examples, lawyers and doctors are required by the law, in some states, to purchase liability insurance, which, in their case, is known as malpractice insurance. Other examples of business owners and professionals who could benefit from purchasing this type of insurance include engineers, architects, accountants, financial consultants, marketing and advertising professionals, real estate brokers etc. In other words, any professional advice or service that could go wrong and harm clients should be covered, to avoid paying lots of money from your pocket for compensations and dealing with lawsuits. Any client might take legal action against you, so you would better be covered, otherwise you may sink in debt and even be forced to close down your business.
Why you need professional liability insurance?
Because we are all subject to mistakes, no matter how good are our intentions and how well-trained we are in our job. Besides, it is not always about negligence, but also about misinterpretation and even violation of good faith.
Examples of incidents covered by professional liability insurance
- Doctors who misdiagnoses patients’ condition or cause them unintentional injury during surgeries or other medical procedures.
- A professional or a marketing team of a company uses copyrighted images or text for social media marketing
- A company signs a contract with a supplier for some materials, but receives poor quality products and no quality assurance check
In the unfortunate case that your business is sued by a client, being covered by professional liability insurance will provide you a lawyer as well as compensation for any damages that arise from the lawsuit, whether or not you are at fault. This type of insurance extends to allegations brought against, your business partners and employees.
What is not covered?
- Bodily injuries – With the exception of medical malpractice, where bodily injuries are covered, others require other types of insurance such as product liability, general liability insurance or workers compensation
- Physical property damage – This is typically covered by general liability or property insurance
- Illegal actions or intentional wrongdoing
- Employment discrimination – This falls under employment practices liability insurance
If it seems overwhelming to consider so many types of insurance, don`t worry; in most of the cases they come together in one package.
The cost of professional liability insurance
The price you will pay for being covered is influenced by some factors including your industry, location, the number of your contracts, the training you provide to your employees and the control procedures you use. Also, the more coverage you need, the higher your costs and the higher your deductible, the lower your premiums.
It is also important to know that your insurer will also take into consideration the history of lawsuits filed against your business, which can also increase your premiums.