Professional Liability Insurance: A Safety Net For You And Your Business

A general liability insurance policy will only cover claims stemming from bodily injury, property damage, personal injury or an advertising injury. But what if a client sues for damages that result from you or your company’s negligence, misrepresentation, violations of good faith or error or failure to render an opinion or offer a service.

That’s where professional liability insurance comes into play. It provides professionals like you a safety net of protection, and covers judgments, attorney fees, court costs and settlements. Even if claims are found to be unwarranted, extended litigation can drain a company’s cash reserves in a heartbeat, or even cause bankruptcy

Who needs professional liability insurance?

You need professional liability insurance if you’re in the business of providing a service or advice to clients for a fee. This includes many professions such as health care professionals, pharmacists, veterinarians, funeral directors, church counselors and architects.

Professional liability insurance is typically customized to meet specific needs of a business or profession. For example, a pharmacist has different exposures than an architect does in a standard business day. Both have the need for professional liability insurance, yet each needs a completely different type of coverage.

The basics

Professional people are expected to have a certain level of competence in their particular discipline or field of expertise. It’s also expected that they will professionally and accurately perform their services, according to the common standards of conduct of their profession. For whatever reason, intended or unintended, if a professional person fails on the job, they can be held responsible for any harm they cause to another person or business.

Professional liability insurance policies are generally issued on a claims-made basis, meaning that the coverage extends only to events that occurred during the period in which the coverage was active. A smart business owner will never let coverage lapse in order to ensure continuous protection against damaging events even if they occurred in the past.

What type of professional liability insurance should I buy?

Unfortunately there’s no “one size fits all” professional liability insurance policy and no standard wording. Policies must be carefully written to cover any risks and exposures particular to your type of business.

Some policies include defense expenses for fighting the lawsuit within the limits of liability while others might exclude any punitive damages awarded to the client. The wording of professional liability insurance policies varies from company to company, and each policy must be read carefully to make sure the coverage fits the exposure.

Premiums for professional liability insurance are based a company’s revenues, type of professional service provided, number of employees providing the service and the company's loss history.

Everyone makes mistakes

Despite your best efforts, well-trained employees and a strong best practices ethic, mistakes are bound to occur. It’s human nature. That’s why professional liability insurance should be integral part of your business insurance portfolio.

You have a lot at stake every time you or your employees are on the job providing a valued service. Professional liability insurance provides the safety net in case there’s a problem.

Contact a Nationwide agent today and find out how professional liability insurance policy can protect you and your business.