HOW MUCH WILL PROFESSIONAL LIABILITY INSURANCE COST MY SMALL BUSINESS?
When trimming the fat from your budget, every cost your company incurs must be weighed against its benefit. And Professional Liability Insurance is a policy that earns its keep. For a yearly premium, it can shield your business from uncapped and unpredictable litigation expenses.
At the same time, as a small-business owner, you want to save money where you can. So let's explore the various factors that impact how much a Professional Liability policy will cost your business and some tips for keeping your risks (and rates!) low.
WHAT IS PROFESSIONAL LIABILITY INSURANCE?
What Is Professional Liability Insurance?
Professional Liability Insurance (also called Errors & Omissions Insurance or Malpractice Insurance) is essential for businesses that offer professional services. All it takes is one disgruntled client to sue your business, alleging you made a mistake that caused them economic losses. The policy protects your business in two important scenarios: (1) when your business does commit an error and (2) when you're sued frivolously (i.e., when your company is blameless).
Even a relatively standard complaint will involve…
- Lawyer fees for every minute they spend on the case.
- Court costs (e.g., filing fees and transcript copies).
- Administrative and discovery costs.
- Expert witness fees.
- Settlement costs.
- Court judgments (when you lose at trial).
Professional Liability coverage makes sure such expenses — which can easily mount into the tens of thousands — don't drain your cash reserves or force you to take on unnecessary debt.
7 RISK FACTORS THAT AFFECT YOUR PROFESSIONAL LIABILITY INSURANCE RATES
7 Risk Factors That Affect Your Professional Liability Insurance Rates
Each company is different, so every policy is different. Your insurance carrier will assess how the following risk factors influence the cost of your policy:
- Company size. This is measured both by your number of employees and revenue. The larger these numbers, the greater your liability exposure.
- Business type. Some industries are more exposed to Professional Liability claims than others.
- Business location. This influences how much your lawyers cost, how friendly local juries are, and how litigious your customers might be.
- How you use contracts. A well-written contract used with every client might significantly decrease your liability exposure.
- Employee training. Your employees are on the front lines with your clients, which can either spark or deter lawsuits.
- Claims history. If you've been sued for professional liability before, your rates might be affected.
- Quality control procedures. Certain protocols might decrease or increase the chance of a mix up.
Keep in mind that each insurance provider assesses this information differently. Working with an insureon agent means you can see quotes from different carriers and get a taste of how they price your business's risks.
3 TIPS FOR REDUCING YOUR PROFESSIONAL LIABILITY INSURANCE RATES
3 Tips For Reducing Your Professional Liability Insurance Rates
There are things you can do to lower your company's Professional Liability premiums right now. The following steps will lower your risks and may result in lower insurance rates when you apply:
- Review your contracts and have your lawyer strengthen the language shielding your small business from liability.
- Have a consultant audit your quality-control and customer-complaint procedures and follow their recommendations.
- Keep your clients in the loop and be transparent. By keeping the doors of communication open, you manage client expectations and minimize the risk that they will be dissatisfied with your work.
FINDING A PROFESSIONAL LIABILITY INSURANCE POLICY FOR YOUR SMALL BUSINESS
Finding A Professional Liability Insurance Policy For Your Small Business
Professional Liability policies are not one-size-fits-all products — each policy should be tailored to the needs of the business at hand. Just like Auto or Health Insurance, Professional Liability Insurance can have high or low deductibles and offer different coverages. For example, a policy might include specialized coverage for intellectual property or cyber liability. Each of these options changes the policy's rates.
Also know that timing is important with Professional Liability Insurance. Because the policy operates on a "claims-made" basis, you're only protected against claims that arise from incidents happening during an active policy period.
This can be confusing territory to navigate on your own, so be sure to talk to an insureon agent about your needs. Or, if you're ready to protect your business, fill out an online application to receive tailored and competitively priced Professional Liability quotes from multiple providers.