People are always trying to sell you and your business on their products, promising results no other product can deliver. But in the case of Professional Liability Insurance, there really is no substitute — it is the only business insurance that financially protects your company from lawsuits over your job performance.
Clients sometimes require this coverage in their contracts to ensure they don't suffer losses because of your work. That's why in order to maintain and grow your business, you might actually need Professional Liability Insurance. Read on to learn about other situations when it's beneficial to have adequate liability protection.
1. Professional Liability Insurance Protects Your Investments
Any business that involves technical training or specialized services can get sued when things go awry. Your particular skills may create market opportunities, but they also increase your risk of liability. Professional Liability Insurance covers your legal expenses when a third party sues you, alleging your services are to blame for their financial losses.
Here are two things to keep in mind:
The situations leading to a Professional Liability lawsuit are distressingly common. (For detailed examples, please see "Professional Liability Insurance Examples: Small Business Lawsuits" and "What Triggers Professional Liability Lawsuits?")
Lawsuits are expensive, and those costs can cripple your business.
2. Professional Liability Insurance Leads to Business Opportunities
There's always a risk that you or an employee could make a mistake in your work — or at the very least, be wrongfully accused of making one! That's why larger business partners might require you to carry Professional Liability Insurance before they sign a contract with you. A Professional Liability Insurance policy signals to your potential clients that you have their interests in mind and that you handle your business responsibly.
It can also give you a professional advantage over competitors who don't have coverage. You can bid for projects your competitors can't handle or advertise a benefit your competitors can't provide. Learn more about that in "Why Clients Want You to Have Professional Liability Insurance."
3. Professional Liability Insurance Might Be Required by Your Industry
Certain industries are more high-risk than others — a fact government or professional licensing organizations pay attention to. Depending on the type of work you do, you might need to carry Professional Liability Insurance to comply with industry standards. For example…
- Every state has rules mandating that attorneys either carry Malpractice / Professional Liability Insurance or advertise their insurance status to clients.
- Medical professionals such as doctors, nurses, counselors, physical rehabilitation specialists, and therapists are often required to carry a minimum amount of Malpractice Insurance.
- Federal Acquisition Regulations (FAR) require businesses working on government projects to carry insurance for "the perils to which the contractor is exposed" — including Professional Liability Insurance.
Your contracts, tax laws, or other regulations in your industry might tangentially require that you have Professional Liability Insurance. A lawyer or insurance agent can provide more details on whether you must comply with these coverage requirements.
4. Keeping the Same Professional Liability Policy May Lower Premium Costs
Certain business owners might think it's savvy to only buy Professional Liability Insurance "when they need it" — i.e., when they anticipate a claim against their business. But there are serious problems with this approach. Namely…
- Insurers ask about your insurance history before agreeing to coverage. A history of obtaining and dropping Professional Liability coverage is a major red flag, which can increase the cost of your policy and can eventually lead to insurers denying you coverage.
- Professional Liability Insurance operates on a claims-made basis, which means you're only covered for incidents and claims that happen during your policy dates. If you commit an error or encounter a situation that you think will lead to a lawsuit and you don't already have coverage, you're unprotected. You must have coverage before the inciting incident and maintain coverage throughout the claim to be covered.
The best business practice, therefore, is to get Professional Liability Insurance as soon as you can and maintain the same policy for the life of your business. This reduces your costs and guarantees protection. Apply online for Professional Liability quotes to protect your business from inevitable lawsuits.