Professional liability insurance protects business owners against lawsuits resulting from mistakes made while doing business with their customers. It’s advisable for any business that provides services to clients to have a professional liability insurance policy. That applies whether you own a business with hundreds of employees and multiple locations, or whether you’re self-employed and provide a single service like writing or graphic design to customers.
Let’s learn more about professional liability insurance, what it covers, and how it can help protect you and your business.
What is professional liability insurance?
If you’re a business owner, professional liability insurance can help protect you from a variety of issues that may arise as part of doing business.
Professional liability insurance is designed to help pay for any legal fees that you incur as part of a lawsuit brought by a client or customer. It covers a wide range of situations, so you can have peace of mind that if something were to happen you wouldn’t be required to pay out of pocket for any resulting legal fees.
What Does Professional Liability Insurance Cover?
Professional liability insurance covers a wide range of legal claims that can be a normal part of owning a business. The most common claims include negligence, breach of contract, inaccurate advice, libel or slander, errors or omissions, and failure to complete a service on time. Even if you run your business well and strive to always meet promised timelines and give honest advice, a client can still sue you if they believe you made a mistake that impacted them, financially or otherwise.
A professional liability insurance policy can help pay legal fees if you are sued by a client for any of these reasons, and can also kick in to pay any settlement money owed after the lawsuit has concluded. When taking out a professional liability insurance policy, you’ll need to determine a policy limit, which can vary from as little as $250,000 to as much as $2 million or more with many policies. If you are involved in a lawsuit against your business, your professional liability insurance will help cover all related costs until you reach the coverage limit.
What does professional liability insurance not cover?
While professional liability insurance does cover a wide range of situations that can result in a lawsuit against a business owner, there are also situations that it will not cover. For example, professional liability insurance will not cover bodily injury or property damage. That means that if someone is injured while on your business’s property, or you cause damage to someone else’s property while conducting business, you’ll need additional coverage to help protect you. In this case, a general liability insurance policy can help.
Another situation that professional liability insurance won’t cover is if an employee is injured while performing their job duties or gets sick as a result from doing their job. For these situations, you’ll want to take out a workers’ compensation insurance policy, which can help pay for those employees’ salaries and medical bills while they recover from their injury or illness.
Finally, professional liability insurance does not cover data breaches. If your business is the victim of a hacker or other cybersecurity attack and you have personally identifiable information of your employees or clients stolen, you’ll need data breach insurance or cyber liability insurance. This type of coverage can pay for legal costs for any resulting lawsuits, or for public relations costs incurred while trying to repair your business’s reputation after the data breach.
Who needs professional liability insurance?
In general, anyone who owns a business that performs professional services for customers needs professional liability insurance. That includes (but is not limited to) accountants, engineers, architects, lawyers, consultants, financial advisors, real estate agents, insurance agents, graphic designers, and software developers.
Some professions are required to carry a specialized version of professional liability insurance. One such example is anyone in the medical field. These workers are generally required to carry medical malpractice insurance, which is a type of professional liability insurance specifically intended for doctors, dentists, psychologists, and other professionals against mistakes that led to a patient’s injury or death.
How much does professional liability insurance cost?
Like other types of insurance, there are many factors that go into how much professional liability insurance costs. Some of these factors include the type of business you run, your business’s location, the size of your business and how many employees you have, the number of years you’ve been in business, your claims history, and specific policy details such as your coverage limit.
The cost of coverage can also be based on your industry. Some industries are more susceptible to lawsuits than others. For example, a doctor who makes a mistake during surgery could cost a patient their life, while a graphic designer’s mistake is more likely to have a financial impact at worst, and they are less likely to be sued. When you’re getting quotes for a professional liability insurance policy, the insurer will see how risky your industry is by reviewing the average number of claims from that industry and quote accordingly.
If the cost of professional liability insurance makes you balk, there are some ways to save on your policy. Some insurers will give policyholders a discount if they can pay the entire year’s premium up-front. Additionally, you can play around with the policy’s coverage limit and deductible.
In general, a higher deductible and lower limit will cost less than a policy with a low deductible and a high coverage limit. You can also ask the insurance provider whether they offer any discounts for bundling. If you have several types of policy from the same insurance company, you can likely get a discount for being a loyal customer.
How to get professional liability insurance
If you’re ready to start protecting yourself with professional liability insurance, the first step is to shop around to get quotes from several different insurers. You’ll want to make sure you get a quote from your current insurer since you may be able to take advantage of bundling discounts, but you also don’t want to automatically go with your current insurer since you might find that a different one will offer you a better deal.
You can go directly to insurers’ websites to get quotes, or you can use an aggregator to get multiple quotes while only filling out your information once. Whichever method you choose, once you have several quotes in hand you can review the costs and coverage and determine which is best for you and your business.
After you’ve determined which insurer you want to go with as your professional liability insurance provider, you will likely work with an agent to build a personalized policy that fits your needs. Working with an agent directly will get you a more tailored policy, and you can ask the agent any questions you have directly rather than having to wait for a response to an online form or wait in a queue at a call center.
Once you have your policy, it’s a good idea to review it on a regular basis so you can make adjustments if needed. Policies usually last a year, so you may find after the initial term that you want to make some changes to your policy before renewing, or you might choose to switch from one insurance provider to another. Since businesses can change from year to year, it’s smart to stay on top of your coverage so you can make sure your business is protected in case you’re involved in a lawsuit.
Professional liability insurance is a necessity for any business owner that performs services for clients or customers. While adding another insurance policy may seem like just another costly expense, it can save you a lot of money in the long run if your business is sued by a client.