Starting your own business is a daunting and often stressful process. With so much at stake, it is important to make certain your business is properly protected. Unfortunately, even the process of choosing insurance policies can seem overwhelming.
No one wants to pay for coverage they don’t ultimately use, but it’s also dangerous to purchase too little and leave the business vulnerable to expensive lawsuits. A business is liable for any errors it makes, after all— which is why it is so important to have professional liability insurance covering operations.
What Does Professional Liability Insurance Cover?
Professional liability insurance, also known as errors and omissions insurance, protects professionals from claims from clients of negligence and other service-related mistakes. Should a client file a claim against your business, your insurance policy will pay for your legal defense expenses.
Claims covered by most professional liability insurance policies include:
- Negligence– When a professional breaches the industry standard for duty of care
- Malpractice– Negligence or incompetence of a medical professional
- Misrepresentation– A false statement that informs a third party’s decision to sign a contract
- Inaccurate advice
It’s important to note that professional liability insurance does not cover the following:
- Criminal prosecution
- Some forms of civil prosecution
- Cyber liability
Do All Businesses Need Professional Liability Insurance?
Depending on the nature of your business, you may not need this form of insurance or may only need a small amount of coverage. Some industries and professions carry much higher degrees of risk than others, so it is important they look out for themselves along with their clients.
For example, doctors, lawyers, and accountants all need liability insurance due to the severe consequences that can be caused by even the smallest mistake.
Not all businesses are as clear-cut examples as those listed above, and it can sometimes be hard to figure out if this sort of policy is applicable to your business situation. As a general rule of thumb, if the business provides a service, then it is likely exposed to professional liabilities.
Even fitness instructors could find themselves on the wrong end of a lawsuit if their clients end up injured due to their instruction. A few other business types that may need coverage include:
- IT consultants
- Financial consultants
- Marketers and advertisers
How Much Does Coverage Cost?
There are a number of factors that play into how much a business’s liability insurance policy will cost, so the final number could vary drastically across different industries or even amongst competitors.
How long a business has been in operation, what their claims history is like, and where they operate are just a few of the elements that are taken into consideration when determining the cost. For example, an experienced family physician in the country will likely have lower rates than a new surgeon in the city. The same can be said for many other professions, as well.
One way a business owner can lower their insurance costs is by implementing high-quality training and quality assurance processes. Insurance companies love to see proof that their policyholders are performing their due diligence and can take it into account when producing a quote, so be sure to accurately document these initiatives.
Before settling on one policy for your business, be sure to request professional liability insurance quotes for small businesses from multiple insurers so you can compare coverage and rates to ensure you get the best deal.
Assessing the Risks for Your Profession
With each industry carrying with it its own risks and insurance requirements, it is important to conduct thorough research into the needs of your business. You might find your business does not require the extra protection of professional liability coverage, but the last situation you want to find your business in is the losing side of an expensive lawsuit without the available protection. Consulting an insurance expert can help you figure out which policy is right for you.