If you're considering purchasing Professional Liability Insurance, you may already know that it offers fundamental protection against services-based lawsuits. But there are other important facts that will help you make an informed decision about your Professional Liability policy.
Check out the following questions and answers to discover how Professional Liability Insurance works and how to get adequate protection that doesn't break the bank.
Q: Does Every Business Need Professional Liability Insurance?
A: Any business that offers skilled services, advice, or products that depend on technical training NEEDS Professional Liability Insurance. The only business insurance that protects you from services-related errors or disgruntled customers is Professional Liability Insurance (sometimes called Errors & Omissions Insurance or Malpractice Insurance).
The circumstances that lead to potential professional liability can be frighteningly common:
- A miscommunication or error in a contract, email, or order form can result in unmet customer expectations and a lawsuit.
- Omitting important information on how to use a product you installed or sold can lead to damages your client blames you for.
- Using the wrong materials during a job or the correct materials that somehow fail could leave you on the hook for the financial consequences.
For more detailed examples of lawsuits your business could face, read "Professional Liability Lawsuit Examples: Lessons for Small-Business Owners."
Q: How Does Professional Liability Insurance Protect My Small Business?
A: By paying for your legal expenses when you're sued for professional liability. Lawsuits — even simple ones — can easily cost between $10,000 and $100,000, depending on length, complexity, the willingness of your client to settle, and your geographic location. They're so expensive because they involve more than just one type of cost. For instance…
- You'll pay a lawyer $150-$400 per hour for every minute they spend on the case.
- You might have to pay an expert witness thousands of dollars to defeat your client's damages claim or explain a technical aspect of your argument.
- You'll be charged for administrative costs such as copying, data processing, special document review software costs, shipping, and travel expenses.
- For certain filings and hearings, you'll have to cover court costs.
- You'll either have to pay a settlement amount to avoid trial or a court-ordered judgment if you lose at trial.
Q: Does Professional Liability Insurance Cover Frivolous Lawsuits?
A: YES. Even if your company wasn't at fault, a client who believes you caused their financial loss might sue you. Professional Liability Insurance will cover your legal expenses regardless of the suit's merit.
Q: How Much Will Professional Liability Insurance Cost My Small Business?
A: It depends. Professional Liability Insurance is tailored to your specific business. Your provider will consider your industry, your claims history, and your services to determine your premium. The options you choose, such as deductible amounts, policy limits, and included types of coverage, will also affect your rates. For a more detailed explanation of the factors that influence your policy price, check out our Professional Liability Insurance cost data.
Q: When Should I Buy Professional Liability Insurance?
A: As soon as possible. As a "claims-made" policy, Professional Liability Insurance only covers a claim if both the triggering incident and lawsuit happen when the same policy is active. Depending on your state's statutes of limitations, there can be years between an incident and the subsequent lawsuit.
That's why most small-business owners purchase a Professional Liability Insurance policy early and maintain the same policy for the life of their business (so there are no gaps in coverage). If you think you might be exposed, or have let a prior policy lapse, bring it up with your insurance agent — there may be ways to extend your protection.
Q: Are There Differences between Professional Liability Insurance Policies?
A: YES. As mentioned above, a Professional Liability policy is tailored to your specific situation. You must scrutinize the potential differences when evaluating quotes and estimates from different insurers or agents. Our article "A Guide to Professional Liability Insurance Quotes and Estimates for Small Businesses" tells you what to look for.
Q: How Do I Get a Professional Liability Quote for My Business?
A: Apply online for quotes today. When you work with Insureon, you have access to quotes from multiple top-rated insurers that specialize in small business insurance. Our agents hand-compile your estimates and send them right to your inbox. Choose a policy that strikes your fancy, and we can take you from quote to bind in 24 hours or less.