When you’re an experienced entrepreneur, you know that business involves taking some risks. However, a huge part of entrepreneurial success depends on proper risk management that helps prevent potentially devastating financial losses. This entails having appropriate professional liability insurance if you’re a service provider.
Here’s a look at some helpful professional liability insurance FAQs.
- Who Needs Errors and Omissions Insurance?
- What Is Covered by Professional Liability Insurance?
- Negligence
- Unfair use
- Administrative mistakes
- Misrepresentation
- Libel/slander
- Breach of good faith
- Incorrect advice
- Why Is E&O Coverage Important?
- What Is Covered by Professional Liability Insurance?
- Legal defense fees
- Settlement costs
- Financial losses
- Non-financial damages
- Malicious acts
- Intentional dishonest acts
- What Is the Cost of Professional Liability Insurance?
On average, small businesses pay about $1,000 a year for professional liability insurance premiums. Factors that determine cost include:
- Business size: An E&O claim against a skyscraper architect would be way larger than a similar claim against a small-scale graphic design firm.
- Deductible (may range from $1,000 to $25,000): Choosing a higher deductible (paid out of pocket) can lower your premium.
- What Is the Coverage Limit?
- Occurrence limit: This is the maximum amount your insurer can pay per claim.
- Aggregate limit: This is the maximum amount your insurer can pay for all claims during the policy’s life.
- What Legal Recourse Is Available If Your Claim Isn’t Covered?
Sometimes, you may face a negligence claim that’s substantially larger than your professional liability insurance limit. This could force you to settle the additional cost out of pocket or challenge it in court with the help of an E&O attorney. To be on the safe side, always involve your insurance agent in assessing your coverage requirements and act accordingly. You can close coverage gaps by increasing your limits where necessary based on your budget.
Professional liability or E&O insurance is highly recommended for those who provide professional services, such as advice or consultation. Whether you’re an accountant, architect, or food service company, you can be sued for your service or advice. In such situations, professional liability insurance will cover your lawsuits and related expenses. Doctors and lawyers may also need special professional coverage for similar liabilities (malpractice, negligence, etc.) they face every day.
Contrary to common misconception, you don’t have to be wrong to need professional liability insurance. This coverage can cover various liability claims made against your company, such as:
Note that general liability insurance may not cover your business in most of these scenarios.
The probability of any company being sued or threatened with a lawsuit is significantly high. It could cost you thousands of dollars in attorney and court fees if a customer ever filed an E&O lawsuit against your company. Restoring your image following such a lawsuit adds to these expenses.
Professional liability insurance can cover the following expenses:
The following costs are excluded:
You can negotiate coverage for costs like licensing board fees with your insurer.
Professional liability insurance policies have two coverage limits, namely:
An example of occurrence or aggregate limits for an E&O policy is $1 m to 2 m.
We Can Cover Your Business
You work hard every day and do your best to provide the best services possible. Despite your honest efforts, not everyone will be satisfied with your products. Professional liability insurance can protect your company if sued for service quality-related issues. Contact us today at Locke Insurance Group to learn more!