Professional Liability insurance

Frequently Asked Questions (FAQ)

• How do I know I have the right coverage for my business?

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• Do I need Professional Liability insurance if I already have General Liability coverage?

  If you already have general liability insurance, you may think that you don’t need professional liability coverage. However, general liability insurance only covers bodily injury, personal injury, and property damage. So, claims related to your services do not fall under the General Liability umbrella.

  Professional liability protects you if a customer claims you failed to deliver a service properly or at all. This means that if your service did not meet the client’s expectations, you could be sued.

  Businesses and professionals operating in industries that require specific expertise will find that general liability policies won’t offer sufficient protection. Professionals in specialized fields need more coverage claims that stem from their professional practices.

• Are there additional coverages available with Professional Liability insurance?

  Professional liability insurance does not cover the following types of claims:

  • Personal injury or property damage: These are usually covered by general liability insurance. For instance, if a client slips in your office, professional liability won’t cover their medical expenses. It also does not cover product-related injuries.
  • Employee injuries or illnesses: Workers’ compensation insurance covers workplace injuries, not professional liability. If an employee gets hurt on the job, professional liability insurance won’t apply.
  • Cyberattacks and data breaches: Some technology E&O policies offer limited cyber coverage. However, comprehensive protection usually requires a separate cyber liability policy.
    
  • Employee discrimination claims: EPLI covers costs for lawsuits resulting from harassment, discrimination, and wrongful termination claims. Professional liability will not cover your business from lawsuits resulting from harassment, discrimination, and wrongful termination claims.

• Who benefits most from Professional Liability insurance?

  E&O insurance is essential for any business offering professional services. This can include large large firms, small businesses, or one-person operations. In many industries, these policies are even legal requirement.

  Some industries need professional liability insurance coverage more than others. Here are some examples:

  Accountants and CPAs

  • Accountants are responsible for managing their clients’ financial matters. Even a small error can lead to serious consequences for clients. Professional liability insurance protects accountants from bearing the full cost of legal defense and settlements in case of mistakes.
  • Example: If an accountant makes a mistake in a client’s tax return that results in an IRS audit and penalties, professional liability insurance would cover the legal costs and damages. This coverage is essential for accountants and CPAs, as even minor mistakes can result in significant financial repercussions for clients.

  Bookkeepers and tax preparers

  • These professionals handle sensitive financial information and are responsible for maintaining accurate records. Mistakes in record-keeping or tax preparation can result in costly consequences for clients, such as penalties or audits. Professional liability insurance shields bookkeepers and tax preparers from the consequences of potential lawsuits.
  • Example: If a bookkeeper misclassifies expenses, a client may lose tax deductions and face higher taxes. Professional liability insurance covers the resulting financial losses. This coverage is crucial for bookkeepers and tax preparers, as their work directly impacts their clients’ financial well-being.

  Consultants

  • Consultants advise clients on critical business decisions. Clients rely on this advice to make important business decisions, invest in projects, or implement strategies. If their recommendations lead to financial loss, they may be sued.
    Professional liability insurance protects consultants from the financial consequences of such claims.
  • Example: If a consultant recommends a failed investment, the client may face significant losses. Professional liability insurance covers any ensuing legal costs. This coverage is vital for consultants, as their professional guidance has far-reaching effects on their clients’ success.
    

  Real estate agents

  • Real estate agents must provide accurate information about properties, zoning, and contracts. Misrepresentations or omissions can lead to financial losses or legal disputes for clients. Professional liability insurance shields real estate agents from the cost of legal defense and settlements.
  • Example: If a real estate agent fails to disclose defects in a property, leading to costly repairs for the buyer, professional liability insurance would cover legal expenses and damages. 

  Home inspectors

  • Home inspectors assess the condition of properties and provide reports to potential buyers. Overlooking issues during a home inspection can result in significant financial losses for clients. If a client faces unexpected repair costs, they may sue their home inspector. Professional liability insurance protects home inspectors from bearing the full financial burden of claims.
  • Example: A home inspector fails to identify an issue in the foundation, leading to significant costs for the buyer. E&O insurance would cover any lawsuits stemming from the issue.

  IT and technology professionals

  • IT and technology professionals develop and maintain systems and software for clients. System failures, data breaches, or software glitches can lead to significant financial losses or reputational damage for clients. Professional liability insurance protects IT professionals from the cost of legal defense and settlements.
  • Example: An IT professional’s software recommendation leads to a data breach and financial losses for a client. Professional liability insurance would cover legal expenses and damages. 

  Healthcare professionals

  • Healthcare professionals provide medical care and treatment to patients. Medical malpractice, misdiagnosis, or treatment errors can have severe consequences for patients. If a healthcare professional makes a mistake, it could worsen a patient’s health conditions and result in additional medical expenses. Professional liability insurance protects healthcare professionals from the financial burden of medical malpractice claims.
  • Example: A diagnostic error leads to a patient’s worsened condition. Professional liability insurance would cover any legal costs and settlements. 

• Why do you need Professional Liability insurance?

  If you provide professional adive or services for a fee, professional liability insurance is a must. Ask yourself:

  • What if I make a mistake that harms my client?

  • Could my advice lead to financial losses?

  • Do my services vary for each client?

  • Could something I say be misinterpreted?

  If you answered “yes” to any of these, E&O insurance is a smart investment.

  No matter how good you are at doing your job, mistakes can always happen. E&O coverage protects you in the case that you do make a mistake that a customer decides to sue you over.

  For example, you have a client in Springfield, Massachusetts, who needs important products shipped to him for the grand opening of his store. But, your company shipped them to Springfield, Illinois. This is a major mistake by your company, and you can expect the client to sue you.

• What does Professional Liability cost?

  There are several business factors that will affect how much you’ll have to pay for this type of insurance, including:

  • Size: Larger companies with more employees have a greater chance that one of them will make a mistake. These businesses typically pay higher premiums.
  • Industry and risk: The specific nature of your business and associated risks may impact your premium. For instance, architects and web-designers face vastly different levels of risk, because the nature of their services differs.
  • Location: Companies based in areas with high claims rates or in highly populated urban centers will usually pay more.
  • Furthermore, many U.S. states will have minimum coverage provisions in place for specific industries. Businesses operating in these states can expect their premiums to be higher. 
  • Claims history: Previous claims can increase your premium.
  • Policy limits and deductible: Higher coverage limits generally result in higher premiums, while a higher deductible can lower your premium.

• Does it have a deductible?

  Like most coverages, professional liability insurance does have a deductible. A deductible represents a certain amount of money that a business will have to pay out of pocket before its coverage kicks in. Typically, the higher your deductible is, the lower your premium will be.

  There are also a number of different deductible options to consider when securing your professional liability policy. Typically, you’ll have to pay a deductible each time you file for a claim. However, most insurers will also offer an aggregate deductible. With this option, you’ll have to pay a capped deductible once annually – and it will cover all your claims, regardless of how many you file.

  Additionally, you can specify that you want a first dollar defense deductible option. It will make your deductible apply only to damages and not legal costs.

  Keep in mind that these options will make your professional liability more expensive.