There are many insurance policies that are required by law, whether federal or state mandated. Other policies, such as professional liability insurance, are not legally required but may be needed in certain situations with other parties.
Professional liability insurance is different than general liability or contractor’s liability insurance, although contractors often carry professional liability insurance. This coverage, also known as errors and omissions insurance (E&O insurance), provides compensation for claims against a professional or business concerning:
- Professional negligence
- Good faith violations
- Inaccurate or misleading advice
This insurance is often required by clients who hire your professional services. You may also need this insurance in order to be approved for certain certificates. Clients wish for potential contractors and other professionals to guarantee coverage in case an accident occurs while the project is in progress. Professionals that often require professional liability insurance includes:
- Medical professionals
- Consultants (IT consultants, for example)
- Insurance professionals
- Software developers
- Real estate agents
- Graphic designers
- Investment advisors
There are professions not included on this list that should be covered under professional liability insurance. Any business that offers professional or specialized services should carry professional liability insurance to cover potential losses due to lawsuits. A single lawsuit can cost thousands or even hundreds of thousands of dollars, especially if it’s drawn out.
Before entering a contract or applying for a certificate, you may be required to purchase a professional liability insurance policy so that any business or client you work with will be compensated for potential damages or mistakes.
Difference Between Professional and General Liability
The main difference between professional liability insurance and general liability insurance is the type of negligence that the policy covers. General liability insurance covers non-professional negligence claims relating to bodily injury and property damage. If a guest trips over a piece of equipment and is injured, for example, general liability insurance can help with the victim’s medical expenses and the business’ legal fees if a lawsuit follows.
On the other hand, professional liability insurance covers professional negligence related directly to an offered profession or specialty. In the medical field, this insurance is known as medical malpractice insurance. If a doctor fails to properly follow up with a patient after a procedure and the patient grows worse, the injury and extra costs associated with it can fall back on the doctor and their practice.
How Much is Professional Liability Insurance for a Business?
The cost of professional liability insurance varies depending on location, industry, size of the business, coverage limits and more. Professional liability insurance costs an average of $710, which is around $60 a month. Most professional liability policies provide coverage per $1 million of coverage. Larger businesses may need higher limits of professional liability insurance.
Some professions are at higher risk than others of these claims or face higher legal expenses related to the nature of their profession or industry. Industries such as medicine and law face some of the highest risks of professional liability. Surgeons and OBGYNs in particular can face expensive lawsuits related to professional negligence. It’s often recommended that these professionals carry their own form of professional liability insurance for extra coverage. While businesses should provide professional liability insurance, it’s important that professionals have reliable insurance in case of an accident, especially if the professional is in between jobs or leaves the previous employer. Some policies will not cover a professional after they leave the practice at which the act of alleged negligence occurred.
Be sure to consider the dangers of your business or profession to decide on the right type and limits of coverage.
Also Read: Who is Covered Under Directors & Officers Liability Insurance