Professional Liability Insurance
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What is professional liability insurance?
Processional Liability Insurance
Professional liability insurance is specialized liability protection for business professionals like engineers, accountants, realtors, insurance agents, and consultants. It provides protection for claims of negligence or misconduct related to the professional services they provide. It’s often referred to as errors and omissions or E&O insurance.
Who needs professional liability insurance?
If your business provides professional service or gives consultation or advice, you should consider buying an E&O insurance policy. This type of coverage can help protect your interests against lawsuits that arise if you make an innocent mistake.
Depending on your state, some professions are legally required to buy professional liability. For some professions, you may not be able to get contracts without adequate professional liability coverage.
A wide rate of businesses can benefit from professional liability insurance, but the following professions customarily carrier E&O coverage:
Engineers
Consultants
Architects
Accountants
Real estate agents
Insurance agents
Home inspectors
Information technology
What does professional liability cover?
If your client or customer believes you’ve done something wrong or committed an error, they can sue. Even if you’re completely innocent. Without coverage, you’ll have to pay legal defense costs and possible claims settlements out of pocket.
If you’re involved in a claim or lawsuit for work mistakes or errors, failed services, negligence in professional services, or damages resulting from missed deadlines, E&O insurance can cover:
- Judgments: Covers the decision of a court or judge, up to your policy limits
- Legal fees: Covers your attorney fees for defending your business in court, up to your policy limits
- Court Costs: Covers your business defense case court costs, up to your policy limits
- Settlements: Covers the cost of settling a plaintiff’s claims out of court, up to your policy limits
How does professional liablity insurance work?
Many insurance companies write a professional liability insurance policy on a claims-made basis with a retroactive date and extended reporting period.
Retroactive Date
means you’re covered for incidents that happen on or after a specified date in your policy.
The extended reporting period
helps cover claims filed within a certain time after your policy expires. This is generally a 30- to 60-day period, but you can extend this period to a year or more for an additional cost.
Your insurance company only covers claims against your business during your policy period within the extended reporting period. And the claim must be from a covered error or omission that happened after your policy’s retroactive date.
Some policies can also be written on an occurrence policy. This means there will be coverage for losses that happen during your policy period, even if the claim gets reported after your policy expires.
How much does professional liability insurance cost?
Like most business insurance protection, there are several factors that go into developing the premium. The factors that help determine your professional liability premium, include:
- Your business classification
- The amount of coverage you request
- Your business revenue or number of transactions
- Number of employees
- Business location
- Claims history
Many websites will quote average or median premiums for professional liability insurance. In reality, your premium may differ considerably from the average. The best way to know what the cost of E&O insurance will be for your business is to get a quote.
What if I already have general liability insurance?
General liability and professional liability both protect against common small business liability claims, but they cover different types of lawsuits.
General liability insurance covers customer bodily injuries, customer property damage, and advertising injuries. In contrast, professional liability policies cover any legal defense costs when a client or customer suffers a financial loss due to your professional services or advice.
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Got professional liability questions?
Yes. In fact, there is no difference between errors and omissions and professional liability insurance; the two terms are often used interchangeably. If you are shopping for professional liability insurance, you are correct if you refer to it as Errors & Ommissions insurance.
Yes. This does happen from time to time. You may have done nothing wrong when providing your professional services, however, your client believes you were at fault and cause them damages. They may make a claim or even sue you. If you have professional liability insurance it covers your legal expenses when the claims do or don’t have merit.