Benefits of Professional Liability Insurance
If you’re in a service business, you work with customers on a constant basis. While you want to provide the very best possible service, guaranteeing it is an impossible feat; no matter how much you plan, there will inevitably be human errors, mistakes, or slip-ups that occur in the line of duty. While the vast majority of customer missteps can be harmless, some could be disastrous for your business, especially if you’re sued for a mistake or failure to act.
With this in mind, professional liability insurance coverage is essential for your business’ long-term health. Such policies protect people who provide expert services or advice from the plurality of suits that could be levied against the business resulting from misconduct. While it doesn’t shield you from illegal or illicit actions or malpractices, it offers protection from potential human error or onsite accidents. Below, you’ll learn of the benefits that come with having professional liability insurance coverage.
What is Professional Liability Insurance for Business?
Also known as errors and omissions or professional indemnity insurance, this covers a professional service business’s costs for two key things:
- Defending itself from negligence lawsuits or similar service-related claims
- Paying for damages or reparations to the claimant, regardless of fault
This goes beyond general liability insurance and is intended for small businesses that either provide a professional service or expertise. Common professions include, but aren’t limited to:
- Interior designer
- Financial consultant
- IT professional
- Real estate broker
- Marketing professional
- Advertising professional
All of the professions listed above require the business owner to provide their customer with both services and advice, which could possibly result in financial or physical harm. For example, if a dentist performs a root canal on the wrong tooth because of a clerical error, the patient could sue the dentist for the cost of the procedure as well as pain and suffering incurred as a result of the dentist’s mistake.
While liability insurance covers a wide range of claims, it doesn’t cover everything. Common issues that won’t be included with this insurance coverage include:
- Property damage
- Intentional wrongdoing
- Illegal actions
- False advertising
- Employment discrimination
5 Ways Professional Liability Insurance Protects Your Business
There are five primary benefits of protecting your business with a professional liability insurance policy:
- Saves you from frivolous lawsuits – Regardless of how hard you work to keep your customers happy, sometimes there’s absolutely nothing you can do. You can be honest and upfront from the beginning and an angry customer may still take issue with the service or advice they received and decide to sue for no apparent reason. Even if you are innocent of all charges, a frivolous lawsuit can cost thousands of dollars in lawyers’ fees and lost time. Few things can be as expensive and frustrating as having to defend a groundless lawsuit brought up by a vindictive customer. And even just one frivolous suit could wreck your business if you don’t have the right coverage in place.
- Covers you even when you’re at-fault – Although errors are often out of your control, actual issues with your professional services could land you in court. If a client’s claim is legitimate, you’ll be on the line for thousands of dollars in lawyers’ fees and court costs. This doesn’t even begin to cover the financial burden if the court sides with the plaintiff and awards them damages. Errors and Omissions keeps you from having to bankrupt your business in order to settle or pay for a viable lawsuit. Additionally, they can assist with indemnity payments and legal proceedings.
- Lets you lower premiums – One overlooked advantage of professional liability coverage is that you can take actions in order to reduce the premium costs. By decreasing risk in the workplace, you can impact your overall premium. Such actions include background checks, safety training, safe working conditions for employees, etc. The fewer claims made on your policy, the lower your E&O rates will be over time.
- Saves you money – In the long run, professional liability coverage is all about risk management. You pay a small amount upfront to avoid having to pay a much larger and crippling amount down the line.
- Demonstrates your professionalism – Your customers come to you for your professional expertise. Having professional liability insurance demonstrates to them that you’re serious about their well-being; you are confident in the quality of your work but are willing and able to pay for anything that might go wrong. Also, it’s not unheard of for clients to ask for proof of coverage prior to signing a large contract.
Obtaining Professional Liability Insurance
There are manifold benefits of having a professional liability insurance policy. But, at the end of the day, it’s primarily about ensuring your business’ long-term future. In a service-related business, you simply can’t prevent all mistakes from occurring. That’s why you need Omissions & Errors.
Are you interested in the benefits of professional liability insurance? Speak with a Now Insurance professional today in order to discuss liability protection and make sure that you’re covered.
- Measom, C. Chron. Advantages & Disadvantages of Having Professional Liability Insurance. https://smallbusiness.chron.com/advantages-disadvantages-having-professional-liabililty-insurance-37946.html
- Insurance Information Institute. https://www.iii.org/article/professional-liability-insurance
- Insurance Information Institute. Small Businesses Have Big Insurance Needs. https://www.iii.org/press-release/iii-small-businesses-have-big-insurance-needs-050619