What is Professional Liability Insurance?
If you’re a business owner, it can sometimes feel like you’re drowning in your insurance policies.
I mean, why the heck are there so many types of insurance in the first place? How do you know which policies you actually need and which ones might not be worth your money?
For example, if you have general liability insurance, there’s no way you need professional liability too, right?
Well … not exactly.
At Berry Insurance, we get that question all the time. We know you want to save money on your business insurance (we do too!), but we definitely don’t skimp on the professional liability insurance for ourselves and you probably don’t want to either.
But we’ll let you decide for yourself: let’s get into everything you need to know about professional liability insurance before you commit to a policy.
What exactly is professional liability insurance?
Did you know 22% of business experience a client complaint or contract dispute. If one of these situations turns into a lawsuit (which is not uncommon in today’s litigious society), that’s where professional liability comes in.
Unlike general liability insurance, which covers bodily injury and property damage claims, professional liability insurance (also known as errors and omissions insurance) covers claims made against your business as a result of the services you provide. Examples of these claims could be for negligence, misrepresentation or even inaccurate advice.
What does professional liability insurance cover (and not cover)?
Just like any insurance policy, a professional liability insurance policy will not protect your business from everything. There are coverages, limitations and exclusions that you should be aware of before getting a policy.
What is typically covered?
- Claims made against you from your professional services or advice
- Claims made against you from work done in the past
- Claims against your employees’ actions.
What typically isn’t covered?
- Injuries to someone else for an accident you cause
- Damages to someone else’s property
- Advertising and personal injury coverage
- Work-related injuries or illnesses
- Electronic data/cyber liability
Do I need professional liability insurance?
In some states, and in some professions, professional liability insurance may be required. Or, you might even be required to have a professional liability policy as part of a contract with a vendor or client.
But even if it isn’t required, if you offer any type of advice or professional services, then our advice is yes, you should purchase this coverage. Even if you do nothing wrong, your client could still sue you if they believe they have been wronged in some way. Without professional liability insurance, the cost of legal fees and your precious time to defend yourself could be devastating.
Still aren’t convinced? Here are some realistic examples (some of which we’ve seen) of situations requiring professional liability insurance to cover:
- A client sues their investment broker after a deal goes bad, even though the client knew the risks involved
- A mortgage broker forgets to disclose certain fees required of the client at closing
- A printer makes an error on a mass produced document for a client
- An architect makes an error in the design of a new home construction
- An interior designer works with a client on several variations of furniture designs, makes a mistake and orders the wrong furniture
- A client forms unrealistic expectations for a service’s work, and decides to sue when they don’t deliver on what they expected
- A business misses a deadline and the client doesn’t get what they need on time
These are just a few examples of potential possibilities. You may think nothing like this could ever happen to you (and it might not), but mistakes happen, and you can even be sued when you’re not in the wrong, so we think if you have a business that serves clients, it’s best to be prepared with this coverage.
How much does professional liability insurance cost?
We know what you’re thinking: how much is a professional insurance policy going to cost me?
Well the truth is, we can’t give you an accurate answer … at least until we become better acquainted with your business and its needs. Your business isn’t the same at the business next door, so your policy (and it’s price) is going to be specifically catered to you.
A professional liability policy can vary significantly based on business type, industry, location, years in business, gross revenues, number of employees, coverage limits, existing or prior insurance coverages, and more; but you can generally expect it to fall somewhere between $400 to $2,000 per year or $32 to $166 per month.
Protect yourself with the right business insurance for your unique risks
I’m sure you know your business is not like any other business. Each business comes with it’s own unique features and associated risks.
While protecting yourself from lawsuits associated with claims about your service is very important, you likely need a lot more than just a professional liability insurance to ensure a costly claim won’t put you out of business.
A comprehensive set of business insurance policies catered to your needs can help you be covered through all your business needs.
Looking for a quote of what you may need? Before you apply, check out this article What Information Do I Need for a Business Insurance Quote? It contains a worksheet that can help you prepare all the information you’ll need when you apply!