You may already know that small business insurance is an investment in the future of your business. But as a small-business owner, you still have a budget to consider. You want to make sure you're getting your money's worth. So it's natural to wonder what certain policies do for your company — and whether you actually need them.
With Professional Liability Insurance, the questions come down to this: can you afford to risk the future of your business on never making a mistake or having an unhappy client? And are you willing to forgo business opportunities that require Professional Liability coverage?
If the answer is a resounding, "No!" let's take a look at the many ways Professional Liability Insurance benefits small businesses.
Professional Liability Insurance Covers Services-Related Risks
Professional Liability Insurance (aka Malpractice Insurance or Errors & Omissions Insurance) covers lawsuits alleging your business made a professional error that caused a client economic losses. If your business involves specialized training, education, or skill, you're at risk of facing Professional Liability lawsuits.
For example, the following situations can trigger a suit:
- Certain important papers get lost in the shuffle, aren't included in a client's file, and lead to your company giving bad advice or missing an important deadline.
- A simple miscommunication makes your client expect different results than what you contracted to deliver.
You don't have to be at fault for these claims to be financially devastating, either. For frivolous lawsuits, attorney fees alone can cost between $2,000 and $5,000.
For more in-depth description of the types of situations that can lead to Professional Liability claims, read "Professional Liability Lawsuit Examples: Lessons For Small-Business Owners."
Professional Liability Insurance Saves Your Business Money
Lawsuits are expensive, point blank. Professional Liability Insurance saves your business money by covering the costs of professional negligence lawsuits when your company is sued. A relatively straightforward suit can easily cost between $10,000 and $100,000, even if you win or settle out of court.
But Professional Liability Insurance spares your company's resources in other ways, too. Your policy can…
- Save you time and stress. If your Professional Liability policy gives your insurer the "right and duty to defend" your business, you won't have to manage your own case. Instead, your provider must do the heavy lifting of orchestrating your defense, from hiring an attorney to making other routine decisions. This extra provision frees you to continue running your business during the litigation.
- Inspire business efficiency. A Professional Liability policy costs less depending on how you run your business (i.e., how you use contracts, how you train your employees, your complaint-resolution procedures, etc.). Instituting effective practices not only reduces your premiums, but also reduces the likelihood of problems with your clients. All said, having a policy could inspire you to run a tighter ship.
For more price information, check out this article about the cost of Professional Liability Insurance.
Professional Liability Insurance Increases Your Business Opportunities
As your business grows, so do your risks. Professional Liability Insurance becomes increasingly important because…
- Larger clients often require their business partners to carry Professional Liability Insurance to cover the work performed.
- Before signing big contracts, clients will often request proof of Professional Liability coverage.
- Carrying Professional Liability coverage can become a selling point, differentiating you from your less-developed competition.
Just like having a mortgage signals a certain level of responsibility in adulthood, carrying Professional Liability Insurance is often a natural step in the evolution of a small business.
You Need Professional Liability Insurance before an Incident Happens
Professional Liability Insurance operates on a "claims-made" basis, which means you're only covered if…
- Your policy is in force at the time of the alleged incident.
- Your policy is in force when the actual claim is filed.
In other words, you can't buy it after you need it. That's why most business owners purchase Professional Liability Insurance as early as possible and maintain the same policy throughout the life of their business.
Not All Professional Liability Policies Are the Same
From different coverage types, liability limits, exclusions, addendums, and industry-specific factors, Professional Liability policies vary wildly. That's why, when choosing a policy for your business, you should request multiple quotes and choose the policy that best fits your needs. "A Guide to Professional Liability Insurance Quotes and Estimates for Small Businesses" can help you make sense of your quotes.
To get Professional Liability Insurance quotes tailored for your small business, apply today. In most cases, we can take you from quote to bind in 24 hours.