Unfortunately, accidents occur even under the best circumstances. Liability insurance protects you against financial losses that can happen because of a mistake. It also protects businesses and professionals against liability, malpractice, misrepresentation, and negligence claims.
With this type of insurance, you’ll be protected up to your policy limit if a client sues you. This article discusses what professional liability insurance is, who needs it, and the difference between general and professional liability insurance policies.
What is professional liability insurance and who needs it?
Suppose your business can’t provide contracted services to a client by a deadline, and the delay causes a loss to the client. Your professional liability coverage can help cover the costs of this so you can get back on track and not pay out of pocket.
Depending on your career, professional liability insurance could be required. This kind of insurance policy also has different names depending on the services you offer.
In medical professions, this is called medical malpractice insurance. Another name is errors and omissions insurance, which applies to copywriters, IT advisors, photographers, real estate agents, and tax consultants. Regardless of its name, any small business or professional needs to have this kind of insurance.
Need Professional Liability Insurance?
Unfortunately, a client can sue business owners and professionals if they believe a mistake has occurred. Without professional liability insurance, you will need to pay any legal fees outright, which could become costly.
There are a few things you need to know about professional liability. This insurance policy exists on a claims-made basis. Meaning you’re covered during your policy period, and any incidents occurring before the coverage began will not be covered. However, insurance companies can include a retroactive date that extends the start of your coverage.
Your insurance coverages include the cost of any defense, fines, judgments, or settlements resulting from lawsuits or claims of misrepresentation, up to your policy limits. However, it’s important to know that your policy limit will depend on several factors, including your claim history, services offered, annual revenue, and years of experience.
Policy coverages don’t protect you against all forms of legal liability. It won’t include criminal prosecutions, cyber liability, or work-related injuries. Insurance covering data security and other technology or security-related issues will require a separate policy. You’ll also need worker’s compensation insurance for any work-related injuries or illnesses in order to help pay for your employee’s medical costs.
In short, professional liability insurance covers you and your company if you make a mistake. But, if you want full coverage against any legal liability or negligence claims, you should invest in a general liability policy as well.
Related: What does professional liability insurance cover and not cover?
What’s the difference between professional liability insurance and general liability insurance?
Both types of liability insurance protects small business liability claims. However, they cover different kinds of lawsuits.
General liability policies protect your business against basic lawsuits. Including protection against advertising or property damage caused by your service, bodily injury, or accidents that occur at your business.
Related: Is professional liability insurance a business expense?
General liability insurance is a great way to protect your business in case of a lawsuit. It covers any compensation for third parties up to your policy limit. However, it won’t cover any workers compensation claims and you will need separate insurance for suits of this nature.
Professional liability provides professionals with protection against claims that arise from professional services. Independent professionals need to have this policy, but many small businesses also benefit from this coverage.
Lawsuits covered by professional liability insurance are usually the most expensive suits that businesses can face. With this kind of insurance, you won’t have to pay for legal expenses regardless of whether the claim is valid. Having both general liability insurance and professional liability insurance will form a comprehensive policy and you’ll be fully covered against any potential liability claims.
Ensure your business is covered from the financial cost of any potential mistakes or lawsuits by having professional liability insurance. Your business is always evolving, and your policy should as well. Getting insurance quotes from different companies will help you find the right coverage for you.
Make sure you also review your insurance yearly and make any changes to ensure your professional liability policy covers any future claims. In any case, having proper insurance mitigates the risks of these potential issues. As a result, you won’t have to fear the financial consequences of unfortunate circumstances.
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