Despite your best efforts, a project does not go as planned, and your client threatens you with a hefty legal suit, citing financial losses due to your professional mistakes. Mistakes happen to the most skilled professionals; this is exactly when professional liability insurance can save you from serious legal action.
Also known as errors and omissions insurance (E&O), this is a safety net for doctors, lawyers, accounting firms, graphic designers, advertising agencies, consultants, or any businesses offering their professional services.
Let’s understand what professional liability insurance covers, why it is important, and how to choose the best one.
Why is a Professional Liability Insurance Important?
Professional liability insurance protects a business from legal action when its employees make mistakes when offering advice and professional services to clients. In the absence of a professional liability insurance cover, clients can sue you if they believe you have made a mistake even when no financial losses are involved.
In some states, businesses offering professional advice and services are also required to get professional liability insurance coverage. Even if not mandated, it is a good idea to get one.
Also Read: The Importance of Professional Liability Insurance
Types of Professional Liability Insurance
There are two types of Professional liability insurance- Claims Made and Occurrence.
- Claims Made: The professional liability insurance policy should be valid at the time of the event and when the claim is made.
- Occurrence: If you are thinking about changing your career path or planning to retire, then the occurrence policy will cover lawsuits for an event that took place during the coverage period well after the policy lapses.
What Is Covered by a Professional Liability Insurance and What Is Not?
Professional liability insurance covers your legal defense costs against claims related to
- Negligence
- Errors or omissions in the services provided
- Misrepresentation
- Inaccurate advice
- Violation of good faith or fair dealing
The insurance policy also covers all the payments related to judgments against you within the prescribed policy limits. However, professional liability insurance does not cover non-financial losses or losses due to dishonest acts.
Choose the Best Professional Liability Insurance: Factors To Consider
Professional liability insurance is your primary defense against alleged claims related to professional breaches. Here is a list of factors to consider before selecting the best professional liability insurance.
- Choose a reputed, financially stable, and regulated insurance company that supports you through the claims.
- A less expensive policy does not mean it is ineffective, nor does a costly one provide unlimited coverage. Make sure to read and understand the fine print regarding the provisions and coverage details of the professional liability insurance that you have chosen.
- If your employer’s professional liability insurance offers limited coverage, you should consider getting individual professional liability insurance.
- Always match the professional liability insurance policy coverage amount with the magnitude of risk you might encounter.
- Choose the right option between claims made and occurrence type of professional liability insurance.
Final Thoughts
In the present market conditions, having a small oversight can lead to a costly lawsuit, but having professional liability insurance cover offers you complete peace of mind. If you offer any professional service, professional liability insurance is a lifesaver. It covers not only the legal costs and settlements in the event of a lawsuit but also protects your reputation and trust.
Investing in professional liability insurance also projects you as a responsible professional who is serious about your work. The cost of professional liability insurance is customized based on the business type, coverage limit, and other factors.
Lastly, remember to get the best professional liability insurance quote and continue doing what you love worry-free.
