Professional liability insurance (PLI) protects professionals like lawyers, accountants, and doctors against negligence claims and other types of claims made by their patients or clients. Professionals specializing in a particular field must have this form of insurance. As discussed below, you need to know about insurance coverage and how it works.
What Is Professional Liability Insurance?
Professional Liability Insurance is a kind of risk management for those with what society considers “professional” levels of knowledge, skill, talent, education, and experience. This person typically possesses exceptional skills. Accountants, attorneys, and doctors can benefit from Professional Liability Insurance (PLI ) because it covers them if a client sues them for negligence in a civil lawsuit.
Suppose an insured party is held legally culpable. In that case, their general liability insurance policy will pay for any legal expenses and payouts for which they are responsible.
How Does Professional Liability Insurance Work?
Professional liability insurance may go by varying names depending on the profession, such as omissions and errors insurance for real estate agents or medical malpractice insurance for doctors. Professional liability insurance is a specialized coverage not available through homeowners’ endorsements, business owners’ policies, or in-home business policies.
Professional liability insurance policies are typically claims-made, which means that coverage is only available for events and claims made that occur while the policy is in effect. You may also come across occurrence insurance, which indicates you’re insured if an incident happened while you were covered—even if you let your policy lapse and a client files a claim against you after it expired. However, such policies are uncommon.
Typical professional liability plans will protect the insured against loss arising from any claim or claims made during the validity of the policy as a result of any covered omission, error, or negligent act performed during the policy period in the performance of the insured’s professional business.
Average Cost
The cost is determined by the area in which you practice and the number of claims against you. Other elements that may influence the cost of your insurance include the number of employees you have and the number of years you’ve been in business.
Professional liability insurance for a small firm is typically around $59 per month ($708 per year). The median cost of business insurance is more accurate than the average cost because it excludes outlier high and low rates.
Most small business owners (51%) pay between $500 and $1,000 per year for insurance, with 18% spending less than $500. This data is based on examining thousands of insurance contracts purchased by Insureon small business customers.
How to Make a Claim?
If a customer sues your company, you must immediately initiate a claim under your professional liability insurance policy.
Contact Your Insurance Company Immediately
Contact your professional liability insurance company if a regulatory agency or subpoena is issued. Give your provider a copy of the letter and your policy number to speed up your complaint.
Most professional liability policies require you to notify the insurer if you suspect you may be sued. In professional liability, claims-made procedures are standard. Thus, delaying a claim may result in a coverage denial.
Preserve Evidence to Counter a Claim of Professional Negligence
As soon as you think something’s gone wrong that could result in your firm being sued, begin compiling records of your business relationship with the customer. It usually includes contracts, emails, fee details, service agreements, scope of work documents, change orders, receipts, invoices, bills, and anything else relevant to the claim.
Business owners should refrain from withholding valuable information to their defense if they ever find themselves in court.
Consult Your Business’s Liability Insurance Provider
You may be obliged to assist your insurance provider and the assigned attorney as part of your professional liability coverage. Typical actions include:
- Setting aside time for depositions.
- Searching through relevant documents
- Answering numerous questions
- Make a timeline of your relationship with the complainant.
- Mediate any disagreements
What’s Included in Liability Insurance?
Coverage does not encompass criminal prosecution or all forms of civil legal liability, just those specified in the policy.
PLI does not cover the following liabilities:
- Injuries to employees
- Employment discrimination claims
- Commercial vehicle use
- Injuries to the body
- Commercial property damage
- Injuries or damages to customers
Core insurance may not cover cyber liability, data breaches, and other technology-related risks. On the other hand, insurance that covers data security and other technology-based security risks is offered as a separate policy.
PLI covers the following liabilities:
- Mistakes and omissions in service delivery
- Services that have not been supplied
- Failure to fulfill standards or negligence
- Contract infringement
Who Should Get Professional Liability Insurance?
Professionals and firms that provide client services should obtain a professional liability policy. These policies protect you and your firm from claims based on professional errors, blunders, judgments, or poor service delivery.
Professional insurance could shield you from financial ruin. Your company could be in jeopardy without it. Some occupations that would benefit from this coverage include:
- Accountants
- Marketing Professionals
- Consultants
- Graphic Designers
- Interior Designers
- Real Estate Specialists
- Technology Specialists
- Medical Professionals
Final Thoughts
Professionals can’t avoid accidents, so Professional liability insurance is essential. If you own a small business, talk to an insurance agent about the types of coverage and how much you need. Professional liability insurance protects you and your firm from lawsuits resulting from professional errors, mistakes, judgments, or poor service.
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