If you’re running a business that provides a professional service or regularly gives advice to clients, you should consider getting professional liability insurance. This type of insurance helps protect you against lawsuits and claims made against you by customers or clients.
The policy you choose will depend on your specific area of business, coverage needs, and field, but as you begin the process of selecting the right coverage for you, be sure to avoid these five mistakes.
1. Failing to Review Multiple Offers Before Selecting One
Choosing the right professional liability insurance policy is critical. Not only are you making a significant financial investment by entering into an agreement with an insurance company, but you are also getting a policy designed to protect you against financial or personal ruin. Because this type of policy provides such a vital protection, it’s important to shop around.
As you do so, assess:
- Policy features
- The reputations of the different carriers
- Coverage limits
Keep in mind that this is a major investment, one that can secure your future.
2. Considering Just the Cost Instead of the Policy and Its Coverage
Before selecting a policy, review its ins and outs. If you consider the fundamentals, all professional liability policies are designed to do the same thing, but does each one have the same degree of reliability?
Consider relevant factors like:
- What perks come with this insurance plan?
- What are the available value-added benefits?
- Will a more extensive plan give you better security?
Cost is important. You must be able to afford your insurance payments but also make sure that you can swing the deductible. For instance, a professional liability policy for $1 million may have a deductible that’s $25,000. You’ll need to come up with these funds before the policy kicks in to cover you. Make sure that you can get your hands on this amount of cash at a moment’s notice. If you can’t, select a policy with a smaller deductible.
3. Not Knowing the Amount of Professional Liability Insurance You Actually Need
Before investing in a professional liability insurance policy, check your state’s requirements for your profession. Also, consider that some fields have larger or more severe loss claims when they arise. Statistics show that real estate, intellectual property, and commercial businesses are more likely to suffer from a loss. It just goes with the territory.
For instance, if an attorney makes an error while processing a large commercial real estate transaction in San Francisco, the losses associated with this mistake would likely run into the millions of dollars.
Be sure to discuss the nature of your business and coverage amounts with an experienced agent to confirm that your policy will protect your company financially in the event of a lawsuit or a claim. The size of your business and the level of risk that it presents determines the amount of coverage you need.
Some insurance companies permit you to include professional liability coverage within a commercial package policy as an endorsement, but it cannot be added to an in-home business policy or a business owner’s policy. Most professional liability policies have deductibles that range from $1,000 to $25,000.
Insurance companies present coverage levels as O/A. The O indicates the amount that is covered for every incident while the A refers to the total amount covered under the policy.
If you have a 5M/10M, for example, your policy covers each occurrence up to $5 million, and the total coverage is $10 million. The coverage does not limit the amount that a plaintiff may recover because the limits are the insurer’s liability. This means that if you have a $5 million limit for each incident and a court finds you liable for $6 million, you’ll be on the hook for the additional $1 million, making it imperative to select a policy with enough coverage.
4. Failing to Know What Kinds of Professional Liability Policies Are Available
It’s important to know what kinds of different professional liability policies are available. Insurance companies offer two different policies for this type of coverage: claims-made and occurrence.
Most professionals select claims-made policies because this type of protection is in place for when an event occurs and for the time when a lawsuit has been filed. Occurrence policies step in to cover claims made for events that took place during a coverage period even if the policy has lapsed.
This type of insurance also goes by different names. For instance, it may be called errors and omissions insurance or malpractice insurance. Errors and omissions insurance covers those who are in the legal or insurance profession while malpractice insurance is customized for people who work in the medical industry. Professional liability insurance is for businesses and professionals. It provides coverage for those who work in career fields like:
- Graphic design
- Software development
- Investment advice
- Information technology
Knowing You’re Protected
With professional liability insurance, your insurer will protect your assets if you make a mistake and someone files a claim against you when you’re providing a professional service. This type of policy also gives you access to legal professionals who will be available to help you defend a claim.
By obtaining the right level and type of coverage, you’ll have the peace of mind that comes with knowing you’re protected.
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from Fundera Ledger https://www.fundera.com/blog/choosing-professional-liability-insurance