We Service the Global Market. Toll-Free 888.873.1982

Professional Liability insurance, Who needs it?

August 3, 2022

Professional Liability insurance, Who needs it?

Every business faces risks. That’s why if you earn your living offering a professional service, disgruntled or non satisfied client feedback can also cost you.

Any business that sells its expertise or services should consider Professional Liability insurance.

Also known as Errors and Omissions (E&O) insurance, this coverage protects your company or an individual and your bottom line from customer claims of late, incomplete, or unsatisfactory, or faulty work.

Accusations like these can lead to costly lawsuits. As a small, medium or large business owner, you should understand the unique risks you face and the insurance coverage you should consider to protect you.

Let’s take a look at the difference between Professional Liability and other liability policies and which ones make the most sense for your business.

What is Professional Liability insurance?

Most successful business owners typically have satisfied clients. But what if a specific client decides to sue? That’s when you’ll need Professional Liability insurance.

Professional liability insurance protects small and larger businesses by covering the costs of client lawsuits claiming substandard or faulty work.

A client may allege your negligence caused them financial harm. And a client that thinks you cost them money may take legal action in hopes of recovering their losses. Professional Liability insurance can cover the costs of lawsuits over:

  • Work errors or oversights
  • Defense costs
  • Undelivered services
  • Missed deadlines
  • Budget overruns
  • Incomplete or faulty work
  • Breach of contract
  • Accusations of negligence

If you fail to deliver a project on time or miss its deadline and your client takes you to court, E&O coverage can protect you by having accurate insurance, you can avoid paying legal costs and cover you should there be a  compensatory judgment leveled against you.

And even if you didn’t miss a deadline, E&O coverage can still protect you. After all, you don’t need to be at fault to be sued. The suit could be groundless.

Successfully defending yourself in court can be expensive. Professional liability insurance will cover those costs and help ensure your business stays financially secure and viable

If you already have a General Liability insurance policy, you might wonder how it differs from Professional Liability insurance. In short, a General Liability policy protects you from third-party claims like:

  • Bodily injury
  • Property damage
  • Product Liability – completed operations
  • Advertising injury (e.g., copyright infringement)
  • Personal injury

For example, General Liability would cover the medical bills of a third party who came to your office for a meeting and slipped on the bathroom floor.

Is Professional Liability insurance required?

Many small business owners may wonder, when is Professional Liability insurance required? 

The answer: It depends on your business and customer or client requirements. 

Some states require Legal or Medical Malpractice insurance for lawyers, doctors, and certain medical professionals.

If Professional Liability coverage isn’t required by law for other service-based jobs. that doesn’t mean it’s not important.

Which businesses should consider carrying Professional Liability coverage?

Any business that provides professional services should look into professional liability coverage. Some examples of businesses that may need this coverage include:

  • Consultants
  • Accountants or auditors
  • Architects
  • Engineers
  • Lawyers
  • Medical professionals
  • Insurance professionals
  • Real estate agents or brokers

For service-based businesses like these, Professional Liability coverage protects you from client lawsuits.

Your clients may require a policy to be in place before they’ll agree to do business with you. They want to know that they’re protected if your company fails to deliver on promises or breaks the terms of your contract.

If a client requires Professional Liability coverage, you’ll need to provide a certificate of insurance that serves as proof of coverage and outlines your policy limits. If you have employees, you may also need a fidelity bond to cover criminal acts by workers, such as fraud.

About CMR | PolicySmart®  www.policysmart.com

PolicySmart’s’ risk management consultants provide independent Group Benefits, Retirement and Commercial Insurance advice by reviewing your current portfolio of policies to improve coverage and reduce cost.  By using our proprietary database – The CMR Database® (comprising some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry providing greater options that will translate to better coverage and lower cost.

Please email  croche@policysmart.com or call 888-873-1982 or 212-447-4300 for more information.

 

About CMR | PolicySmart®

CMR & Associates’ risk management consultants provide independent group benefits, retirement and insurance advice by reviewing your current plans to improve coverage and reduce cost. Through CMR’s proprietary database – The CMR Database® (comprised of some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry for greater options that will translate to better coverage and lower cost.