Businesses are risk bound, and it can happen intentionally or unintentionally. It can occur even in the services offered to clients. There can occur legal complications in case of such errors. Professional liability insurance comes into play under such circumstances.
Also known as errors and omissions insurance (E&O), professional liability insurance protects professionals who may be held liable for errors or omissions in their work. However, this insurance is named after the profession that seeks it. For example, it is known as medical malpractice insurance in medicine and errors and omissions insurance in the case of real estate.
This insurance can help cover the costs of legal defense, settlements, and judgments in case of a lawsuit or claim against the professional for their services or advice.
Professional liability insurance is recommended for professionals who provide advice, expertise, or services to clients, such as doctors, lawyers, accountants, consultants, insurance agents, real estate agents, architects, and financial advisors. Therefore, those professionals who have the risk of a lawsuit should obtain a PIL.
Their clients rely on professionals with specialized knowledge and abilities, such as doctors, lawyers, accountants, architects, engineers, and consultants. A client may sustain a financial loss, physical harm, or other damages if a professional makes a mistake. In these circumstances, a client has the right to sue the expert for damages.
Without insurance, the professional would be responsible for covering the high costs of legal defense, settlements, and judgments out of pocket. With this insurance coverage, one gets prepared to handle any mistakes that may occur as they are financially covered. Therefore, it helps in retaining the business.
There can be instances in any profession that doesn’t meet the expected standard or when the customer is misled intentionally or delivered an unsatisfactory service. Such occurrences where professional liability insurance comes into play are mentioned below.
If your client feels you haven’t met the standards after delivering the product or service, they can sue you for professional negligence.
When there is a failure to keep up with the timeline mentioned in the contract, the legal implications can be massive for the occurred contract breaches. Professional liability insurance can cover any resulting damages when there occurs a failure to meet the terms of the agreement.
Errors or omissions in work, such as a mistake made by a doctor during a medical procedure and the resulting claims, can be covered with professional liability insurance coverage.
However, professional liability insurance policies may have specific exclusions and limitations, so professionals need to review their policies to understand what is carefully and is not covered.
| Bodily injury or property damage | Customers or clients who sustain bodily injury or property damage while conducting business with you won’t be covered by professional liability insurance. |
| Lawsuits filed by employees with allegations | The coverage for such employees comes under employment practice liability insurance. |
| Fraudulent Acts | The professional liability claim that comes out when you or one of your employees breaks the law won’t be covered. |
The majority of policies for professional liability insurance are claims-made, which means that coverage is only valid for claims that are made and incidents that occur while the policy is still in effect.
There are also occurrence policies, in which you are covered if an incident occurred while you had coverage. In other words, you will still be covered if your policy expires and your client files the complaint after the active policy period.
Most professional liability policies will cover the insured against any loss caused by a claim or claims made during the policy period because of a covered error, omission, or negligent act that happened while the insured was running their professional business.
The price for professional liability insurance will depend on the frequency of lawsuits in your profession, the amount of coverage, the size of your company, and your claims history.
Professional liability insurance will cost between $500 and $1000 per year. The monthly rate for professional liability insurance will be $59.
With a PIL, you are covered for any claims resulting from negligence or contract breach. While the cost of insuring will depend on several factors, you can compare and make an informed choice with over 200 insurance companies listed with Way.com.
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