Significance of Professional Liability Insurance
Professional liability insurance is one of the most important parts for any professional. It can rightfully be compared to homeowner’s insurance. Which means; it is true that you may never need it, but if you do, you will be very happy to have it.
What is Professional Liability Insurance?
Professional liability insurance protects professionals against negligence and other claims alleged by their clients. It is also known as Errors and Emissions Insurance. It provides coverage against claims for negligence, malpractice or misrepresentations. Any individuals that deal with public in a professional capacity must gain this insurance. Any unexpected claim may cause you and your firm to suffer from potential financial hardships.
If you have decided to obtain professional liability insurance, it is imperative you know the answers to certain questions beforehand. Questions like;
- What is the purpose of this coverage?
- What services can be covered?
- Who is eligible to receive this coverage?
- What is excluded from coverage?
- What are the criteria to practice in accord with the coverage?
Why Should You Get Professional Liability Insurance?
If a client faces financial, physical or psychological loss through your fault, you might be sued in professional capacity. Mistakes happen sometimes. You can certainly take precautions, but you can never reduce them to completely zero. It is just not humanly possible. You might be called to court when a lawsuit is launched against you for said mistake(s). Lawsuits are time consuming, stressful and inconvenient. But when you are prepared for the unexpected, you can reduce this headache to a large degree. Professional liability coverage provides the respite in such situations.
The Extent of Services and Coverages in Professional Liability Insurance
The provision in the commercial insurance policy specifically lay out what and who is covered. It likely provides coverage for breach of fiduciary duty, lack of regulatory compliance and legal coverage. Generally, his policy is structured to provide coverage when the professional makes a mistake or is accused of malfeasance. Despite the professional being held legally responsible or not, the insurance will offset the cost of responding to legal claims.
For example; as a professional accountant and a tax advisor, you might forget to mention a client of the time frame for their 401(k) rollover upon switching a job. The client might hold you responsible and liable for penalties, fees and/or taxes. This insurance will serve you in such scenario.
What is Excluded in Professional Liability Coverage?
The coverage for professional liability does not provide protection in criminal prosecution. Not all forms of civil liability are covered either; only those specifically listed in the policy. Cyber liability or any other technological issue may also not be covered in core policies. Insurance agency states that they are separate policies that provide coverage for data security and other technology.
Example of Professional Liability Insurance
Insurance for medical malpractice is common example for professional liability insurance. Healthcare professional are frequently required to do their duties under a constant threat for alleged medical malpractice. This is defined as an act or omission by a healthcare provider in which they provide treatment which falls below the standard of healthcare resulting in injury to the patient or death of the patient. Medical malpractice is usually treated as civil torts in United States. It can be very expensive for individuals who get caught in this lawsuit. Insurance for this can offset a lot of the costs.
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