What Is Professional Liability Insurance?

This type of business insurance compliments your General Liability Insurance policy. Sometimes this type of coverage is called errors and omissions insurance. Some states require certain businesses to carry Professional Liability Insurance, and some clients and contractors require it before agreeing to work with you. If you or your company is sued due to a mistake that caused a customer to suffer a financial loss, Professional Liability Insurance will help cover your legal fees.

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Who Should Get Professional Liability Insurance?

Any small business and contractor can benefit from having a Professional Liability policy. However, some industries are required by law to have Professional Liability Insurance. Those include:

 

• Government Contractors - Individuals or companies that are awarded a government contract. These contractors include construction, financial services, cybersecurity, transportation, logistics, and healthcare services.

• Healthcare Providers - A specific type of Professional Liability Insurance, called Medical Malpractice Insurance, is required for medical professionals across the United States.

• Real Estate Agents & Brokers - Often, there is a mandated minimum level of coverage for real estate professionals.

• Insurance Agents - In some states, insurance agents will lose their license if they don’t have current Professional Liability coverage. 

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Other professionals that are not required by law to carry professional liability insurance but can significantly benefit from a policy include but are not limited to:

 

• Accountants - They work with clients' financial information, which is a high-risk endeavor as even the slightest mistake can cause catastrophic results.

• Advertising Agencies - These companies help other businesses boost sales and increase their brand. If your campaigns and advice lead to a financial loss for your client, they can sue.

• Independent Consultants - Any contractor who directly advises on career coaching, public relations, or business communication can benefit from a robust Professional Liability Insurance policy.

• Graphic & Interior Designers - Both professions heavily rely on the talent and advice of the employees. This means that mistakes will often result in a lawsuit.

• Technology Companies - Companies that provide business software and hardware are particularly vulnerable. If technology at a company fails, they can sue the group that provided the hardware or software.

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What Does Professional Liability Insurance Cover?

You might be wondering what exactly qualifies as a professional mistake. These claims generally fit into four categories: negligence, misrepresentation, inaccurate advice, and libel or slander. For example, if you run a cake decorating business and fail to deliver a cake on time, you can be sued for negligence. If you encourage a couple to buy a home, when you know they want to rent, and they buy a house in a neighborhood that doesn’t allow rentals, you could be accused of providing inaccurate advice. 

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Professional Liability Insurance can provide funds for the legal defense fees and help pay for damages, disciplinary proceedings, earnings loss, and subpoena assistance. Without Professional Liability Insurance, a small mistake can cost thousands of dollars out of pocket. 

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What Is Not Covered by Professional Liability Insurance?

Several business insurance policies may be required for your company to have full coverage. Professional Liability Insurance is only one piece in a much larger puzzle. This type of insurance will not cover:

• Bodily injury or property damage to a third party. This type of claim requires you to have General Liability Insurance.

• Work-related injuries or illnesses are also not covered by this policy. They must be reported to a supervisor and then submitted to your Workers' Compensation Insurance Policy.

• Data breaches are not covered. If your business accidentally loses personal identity information, you will need Cyber Liability Insurance to proper handle the fallout.

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For more information on Professional Liability Insurance for your business, request a quote or contact Slade & Collins Insurance today. We are located in Lexington, KY, and we proudly serve Kentucky, Ohio, Indiana, and Tennessee.