What Does Professional Liability Insurance Cover?
Professional liability insurance for small businesses helps cover claims of:
- Inaccurate advice
- Personal injury, like libel or slander
Even if you didn’t do anything wrong, your client can still sue your business if they believe you’ve made a mistake. Without coverage, you’ll have to pay expensive legal defense costs out of pocket.
What Professional Liability Insurance Doesn't Cover:
Professional liability insurance doesn’t cover every kind of claim. It won’t help your business with claims of:
- Bodily injury or property damage: You’ll want to get a general liability insurance policy to help cover claims that your business hurt somebody or damaged their property.
- Work-related injuries or illnesses: If your employees get hurt or sick from their job, you’ll need a workers’ compensation insurance policy to help them recover and return to work.
- Data breach: If your business loses personally identifiable information (PII), data breach insurance can help you respond to the breach. Some insurers call this coverage cyber liability insurance.
How Professional Liability Insurance Works:
Many insurance companies write a professional liability insurance policy on a claims-made basis with a retroactive date and extended reporting period.
The retroactive date means you’re covered for incidents that happen on or after a specified date in your policy.
The extended reporting period helps cover claims filed within a certain time after your policy expires. This is generally a 30- to 60-day period, but you can extend this period to a year or more for an additional cost.
Your insurance company only covers claims against your business during your policy period within the extended reporting period. And the claim must be from a covered error or omission that happened after your policy’s retroactive date. It can help cover:
- Legal defense costs
- Disciplinary proceedings
- Loss of earnings
- Subpoena assistance
Some policies can also be written on an occurrence policy. This means there will be coverage for losses that happen during your policy period, even if the claim gets reported after your policy expires.
Who Should Get a Professional Liability Policy?
You may be wondering who needs professional liability insurance. It’s an important coverage that business owners who provide a service to a client or customer should have. You’ll want to get professional liability insurance coverage if you:
- Have to sign a contract that requires you to carry coverage
- Offer professional services directly to customers
- Regularly give advice to clients
Be aware that some states require this type of business insurance.
What Is Professional Liability Insurance?
Professional liability insurance helps cover you and your company if you make a mistake in the professional services given to a customer or client. This coverage is also known as errors and omissions insurance (E&O). Even if you’re an expert in your business, mistakes happen. And if your client or customer thinks a mistake in your professional services caused a financial loss, they can sue you.