Running a business involves a lot of paperwork: contracts, leases, order forms, bills, and — of course — insurance documentation. With so much paper floating around, it can be hard to keep track of what's important. But it's crucial to understand the differences between the forms you'll encounter when securing Professional Liability Insurance for your small business.
Professional Liability Insurance Applications
Professional Liability Insurance (aka Errors & Omissions Insurance or Malpractice Insurance) covers your legal expenses when your business is sued for allegedly providing negligent or incomplete services. Because even small situations can lead to massive legal liabilities, it's one of the most important coverages for services providers.
Risks differ dramatically from business to business, so Professional Liability Insurance must be tailored to your business's unique exposures. The application aims to discover what your business does and how it handles clients. Generally, the application asks for…
- Information about your workforce, including the number and types of employees, payroll, and executive compensation figures.
- Data on your revenue, including what proportion comes from your largest clients.
- Potential business entanglements, such as ownership interests in clients or subsidiaries.
- How your business uses contracts, including internal control policies.
- Your insurance history and prior claims.
For a more detailed rundown of what's involved in a Professional Liability Insurance application, read "How to Apply for Professional Liability Insurance." Or check out an online insurance application for yourself.
Professional Liability Insurance Quotes
Filling out an application is the first step. The next is to scrutinize the Professional Liability Insurance quotes you receive from your agent. Because Professional Liability policies are highly personalized and vary from insurer to insurer, it's important to know the differences between your quotes — beyond the price tag.
The following features can influence premiums and the effectiveness of your policy:
- What types of coverage are included or excluded? Does your company need, for instance, Cyber Liability coverage in the policy?
- How does the quote define your industry or the scope of what your business does?
- Does the policy give your insurer the "right and duty to defend" your claims?
Read "A Guide to Professional Liability Insurance Quotes and Estimates for Small Businesses" to get familiar with how quotes can differ and what questions to ask your insurance agent.
Proof of Professional Liability Coverage: Your Certificate of Liability Insurance
A Certificate of Liability Insurance (see this sample Certificate of Liability Insurance for reference) is the document you receive after your policy is approved. It acts as proof of your Professional Liability Insurance coverage.
Unlike your policy itself, the Certificate of Liability Insurance is not a legal document. But it is an important piece of paper that helps your business in a few ways. Specifically…
- It saves you time. You can quickly access the essential details about your insurance coverage on one page. You'll know how to contact your insurers, which insurers provide which coverage, your deductibles, and the policy limits.
- It demonstrates your coverage to clients or business partners. As your business grows, you will encounter more and more potential clients that won't do business with you unless your work is insured against professional errors. A Certificate of Liability Insurance is the standard proof of coverage.
- It helps you keep clients in the loop. By listing clients or other interested parties as "Certificate Holders," you guarantee that they get updated information about your insured status. When things change, your insurer informs them of the changes.
See "Does My Small Business Need a Certificate of Professional Liability Insurance?" to learn more.
The Grail: Your Professional Liability Policy
A Professional Liability Insurance policy is like any other contract — full of very important language that defines the legal obligations between you and your insurer. At its most basic level, the policy states that you'll pay your premiums for certain coverages. But there's so much more:
- Declarations at the beginning of the policy state the essential details, such as your premium, coverage levels, policy limits, and the identifying information for you and your insurer.
- The Insuring Agreement states in legal detail exactly what your policy covers, how costs are assessed against your policy limits, and other important details.
- Conditions specify your duties to the insurer, such as when you need to communicate with the insurer if a claim is made against your business.
- Endorsements can add or exclude coverage types, change clauses in your Insuring Agreement, or redefine key terms used throughout the policy.
Need help finding a Professional Liability policy? Fill out an online insurance application today to begin the paper trail that leads to your small business's financial security.