Professional Liability Insurance

Professional liability insurance provides protection for professionals in a variety of fields, from healthcare to architecture to law, in the event that one of their clients or customers files a claim against them because of the work they provided. But what exactly does it cover? How much does it cost? How do you know if you need it? We’ve got all the answers here!

Also Professional liability insurance is called errors and omissions insurance, protects your business from potential mistakes and lawsuits related to your job as an independent contractor or freelancer. This type of coverage is similar to general liability coverage, but it’s written specifically for individuals who work independently as contractors or freelancers, such as IT consultants and web designers. Errors and omissions insurance can protect you if you make a mistake that causes damages or injury to someone else, even if you aren’t at fault.

What Is Professional Liability Insurance?

Professionals are at higher risk of being sued for their services than many other people. There are two main types of insurance to protect professionals from personal liability in the workplace. Professional liability insurance, which protects your business and assets from lawsuits related to your work, and car insurance, which protects you against injury or damage to someone else's car as well as your own.

As a professional, you may have equipment and physical assets that are necessary to carry out your job, including a car, computer, desk and phone. If you injure or damage another person's property while performing your job duties — whether it's intentional or an accident — car insurance covers you. Professional liability insurance protects your business from personal injury claims against it.

How Professional Liability Insurance Works

Most homeowners don't carry the additional Professional Liability Insurance needed for most homeowners. That doesn't mean you have to pay for a mortgage and car insurance on top of this coverage, though. Just ask your insurance agent what you need in order to make sure you're completely covered.

This coverage insures against the risks involved with professional service work and comes standard with many workers compensation and general liability policies.

What Is Included in Professional Liability Insurance?

For protection against possible errors in your profession, Professional Liability insurance includes Medical Malpractice coverage, Client Protection Coverage, Employee Dishonesty Coverage and Errors & Omissions Coverage. A Professional Liability policy is important because they protect the professional and their business from these potential claims.

Professional Liability Policy Wording

A professional liability policy wording protects against losses from lawsuits involving allegations of a breach of duties to customers, employers, and other professionals. The policy covers up to $1 million per occurrence with a cap on legal defense costs ($10 million). There's also an optional 10-20% deductible that can be paid by the company or passed onto employees.

If you're self-employed, have another business you run, or are in sales then professional liability insurance is a must for your business. It covers any issues related to breaches of duty as outlined in the Professional Liability Policy Wording. The cost varies based on factors like: what line of work you're in and whether it's needed full time (or part time).

How Much Does Professional Liability Insurance Cost?

Professional liability insurance is one of the most overlooked types of insurance for professionals. In fact, it's actually one of the most cost-effective types because a $1,000 claim could be worth up to $500,000 or more depending on your industry and specific risks faced. Here's a brief rundown of what professional liability insurance covers and what it costs.

In fact, business insurance is often an afterthought for professionals, even though liability insurance could be one of your smartest investments because of how much it can save you if you're sued. Professional liability policies usually cost between $300 and $1,000 annually but may vary significantly depending on your industry and your location. For example, professional liability insurance costs in New York are typically higher than average since litigation rates are higher than in other parts of the country.

Who Needs Professional Liability Insurance?

You should purchase professional liability insurance if you are a professional. Professionals might include: in the event of a mistake that causes harm to someone else, professional liability insurance protects your personal assets. Having this type of insurance coverage is not required by law, but it is highly recommended. It depends on your professional or personal situation how much liability insurance you need. For example, if you work alone and have no partners in your business, a smaller policy might be sufficient.

More comprehensive coverage is recommended if your business grosses more than $1 million and has more than one employee or partner. Different factors affect the cost of professional liability insurance, including the type of company (professional vs. personal), the number of years in business, the state of operations, and the type of work.

Who Should Get a Professional Liability Insurance Policy?

If you are a professional who provides advice to clients, you may need a professional liability insurance policy. Professional liability policies protect the insured person against claims of negligence or malpractice in their profession. This can include attorneys, accountants, architects, engineers and more. These policies generally cover legal fees that may result from work-related accidents or errors as well as pay for damages that have been done to others because of your work-related mistakes.

What Is the Difference between Individual and Professional Liability Insurance?

A personal liability policy provides coverage for bodily injury and property damage you cause to others. Professional liability insurance protects your business from claims made against it for professional negligence.

The cost of professional liability insurance depends on the type of business, industry, risk level and various other factors. The annual premium cost can range anywhere from $1,000-$15,000+.

If you work in fields such as the medical profession, law or accounting, professional liability insurance is a must. This insurance is often mandatory. Insurance companies offer policies designed to protect you from legal action resulting from negligence.

What Are the Basic Two Types of Professional Liability Policies?

There are two basic types of professional liability insurance, per accident and aggregate. The difference between the two policies is who pays the claim. In a per accident policy, you will have to pay the claim out of your own pocket. In an aggregate policy, the insurance company will pay up to a certain limit and then it is up to you to pay any claims that exceed that limit.

What Are your Covered Losses?

A professional liability insurance policy typically covers wrongful deaths, bodily injuries, property damage, and third-party damages (including libel suits). If you work in a profession that requires professional liability insurance, you might not need it under other insurance coverages. 

For example, doctors must have this type of insurance as a requirement from their state boards so that they can practice medicine; lawyers may choose to get professional liability insurance as well but it is not required by law.

Conclusion

Purchasing a professional liability insurance policy is a smart way to protect yourself in case you are ever at fault and it will also provide peace of mind when you're starting your new business. Professional liability insurance is an important protection for professionals and freelancers, especially those in the design industry.

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