Even the most experienced and highly qualified professionals make mistakes sometimes. That’s why you probably need professional liability insurance if you’re a professional – like a doctor, lawyer, realtor, accountant, or contractor – who provides services to your clients for a fee.
Professional liability insurance indemnifies you against losses incurred by a professional error, omission, or negligent act. Here’s what it is, what it does and doesn’t cover, how much it costs, and who needs it.
What Professional Liability Insurance Is
Professional liability insurance, also called errors and omissions insurance in some industries, can protect your company from liability if a client sues you over a mistake they claim you have made. The coverage kicks in even if the claims are found to be spurious. This insurance is specialty coverage that is not included in standard business insurance policies.
Professional liability insurance isn’t always called with this name. In the medical field, for example, it’s usually called malpractice insurance. If you’re a realtor, your professional liability insurance will probably be called errors and omissions insurance. Regardless of what it’s called, this insurance is necessary to protect you against lawsuits, and in some states, it’s required for you to practice your profession.
What It Covers
Professional liability insurance can protect your business against a wide range of claims resulting from errors or omissions you might make during your work or against negligence. It can cover your legal fees and settlement costs if you:
- Fail to meet professional standards or commit professional negligence.
- Miss the deadline to deliver your services, resulting in increased costs for your client.
- Commit an error or omission.
- Break your contract.
- Commit any form of professional misconduct.
For example, if you run an architecture firm that fails to install bathrooms that adhere to Americans with Disabilities Act (ADA) standards, you could be sued for failure to adhere to professional standards. Your professional liability insurance would cover the costs associated with this lawsuit. If you’re a doctor and misdiagnose a patient, causing them to deteriorate further, medical malpractice insurance could protect you against settlement costs and legal fees resulting from the resulting lawsuit.
What It Doesn’t Cover
There are some things professional liability insurance doesn’t cover, primarily because those things should be covered under general liability or other small business insurance policies that you should carry. For example, if a client gets hurt while on your company property or your premises burn down, that would be covered under your general liability policy rather than your professional liability policy.
Workplace harassment, wrongful termination, or other lawsuits filed against you by disgruntled employees or former employees fall under the umbrella of employment practices liability insurance. Nor does professional liability insurance cover legal costs stemming from intentional acts of fraud or other criminal acts.
How Much It Costs
Most professionals’ average cost of professional liability insurance is about $59 a month. However, some types of this insurance, such as medical malpractice insurance, can cost thousands a month. If you’re a doctor, the hospital where you work should pay your medical malpractice insurance premiums, but if you’re in private practice, you’ll have to pay them yourself.
Who Needs It?
Any professional who performs services for clients for a price should purchase professional liability insurance in case they get sued. In addition to doctors, lawyers, and, in some states, realtors, the following professionals should have this insurance:
- Financial and investment advisors
- Accountants
- Management, IT, and other consultants
- Graphic designers
- Software developers
- Engineers and architects
- Insurance brokers and agents
- Contractors
Medical professionals of all kinds may be required to carry medical malpractice insurance, not just doctors. Nurses, dentists, psychologists, and other medical professionals are all at risk of making a mistake that could leave a patient severely disabled or dead. These professionals definitely need medical malpractice insurance. Even if you’re not required to carry professional liability insurance, you may be required to tell clients whether you have it or not.
Do you need to carry this type of insurance? If you’re a practicing professional providing services to the public for a fee, you probably do need this type of insurance. It might seem unnecessary now, but it won’t when you’re getting sued by a disgruntled client. Make sure you’re covered in the event of a malpractice lawsuit. Get your own professional liability insurance coverage and protect everything you’ve worked hard for.
