Running a business requires time, effort, dedication and planning. While you meticulously plan the goods you'll produce, the areas you'll serve and the physical location of your business, it's important to also keep in mind insurance. Business insurance is designed to protect a business' assets from products, stores and food to employees and directors of the board. But the primary source of risk businesses face are the clients themselves.
Accidents happen. Mistakes can be made. It's not the end of the world, but a bad lawsuit could be the end of your business. If you don't have the right business insurance policy, you could be looking at thousands of dollars in court fees, attorney costs and settlement prices after a single mistake.
If you or your company offers professional services, you will need professional liability insurance.
What Does Professional Liability Insurance Cover?
Professional liability insurance goes by many names, such as Errors and Omissions insurance, E&O insurance and medical malpractice insurance. This coverage handles accidents involving professional negligence. Professional negligence refers to incidents where a self-proclaimed professional or specialist makes a mistake while providing their services, and that mistake causes a client to lose money.
For example, say you run a small IT consulting firm. You advise a client, but that advice causes a blackout that leads to your client losing thousands of dollars. The client can then sue you and the company for that loss.
Like all insurance, this coverage has certain limits. Professional liability insurance will not cover:
- Intentional harm
- Criminal acts
- General liability
- Property damage
- Employee lawsuits
- Directors and officers
- Accidents that occur while the professional is under the influence of drugs or alcohol
What Is The Difference Between Professional Liability And General Liability?
General liability and professional liability are similar. But they cover very different risks for businesses. While professional liability insurance covers professional negligence, general liability insurance covers non-professional negligence. Non-professional negligence refers to accidents that arise out of everyday business operations not related to a specific profession or specialty. For example, if your yoga client walks into your studio, slips and falls in the lobby, this is a circumstance of general liability.
Professional liability is crucial for certain industries and required for others. Common professions that carry professional liability insurance include:
- Lawyers
- Accountants
- Medical professionals
- IT consultants
- Home inspectors
- Real estate professionals
- Insurance agents
If your company offers a specialized service, consider investing in professional liability insurance.
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