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Professional liability insurance helps defend you against claims your clients may make against you. Professionals across many industries can benefit from this coverage, from doctors to media consultants. However, it’s important to understand the type of coverage you buy and what claims will be covered.
Professional liability insurance covers your business if a client or patient claims you provided incorrect advice or negligent service. This type of policy helps you pay for expenses related to being sued by a client for a covered claim. This insurance is also called errors and omissions insurance, or the shorter E&O.
Your professional liability policy protects you from a variety of different claims, including:
Your policy should reimburse you for expenses related to defending yourself in court and paying any settlements or fines. These may include:
Your services and advice could turn into an unforeseen loss for your clients, even if your advice is supported by research or your services meet top-quality standards. In addition, customers may sue you for mental and emotional suffering. Liability claim cases and settlements can get expensive and take a toll on your business.
Professional liability insurance works best for those who provide clients a service or advice for a clients’ success or physical care. Professions well suited for this liability coverage:
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Professional liability kicks in when the damage results from faulty professional advice, omitting key advice or failing to perform your offered service. The damage can include physical injuries to patients, property damage, financial losses and emotional trauma.
Example: A celebrity receives negative media attention and a smeared reputation after following a public relation manager’s advice.
Public liability kicks in when the damage is unrelated to your profession or when it’s an effect of a professional service performed correctly. This liability can include personal injury or property damage.
Example: A customer spills your restaurant’s hot drink and burns their skin. Your restaurant didn’t provide a warning that the drink was hot.
Your professional liability policy likely won’t cover intentional or criminal actions leading to your clients’ harm. It also doesn’t cover all liability risks your profession may face, such as defaming another person’s reputation or misleading advertising. The exact areas covered should be outlined in your policy.
What should I watch out for with professional liability coverage?
When buying professional liability protection, keep these factors in mind.
When a client claims you gave faulty professional advice or services, you’ll need to report that information to your insurance company. You should understand three important aspects of reporting the claim:
Most policies specifically note when a client can file a claim against you. If you bought a claims-made policy, you can only report damage that happened while your policy was active. Also, you’re only covered if the claim gets reported while the policy is active.
However, if you bought an occurrence policy, you can report the claim after the policy ends as long as the damage happened while it was active.
Insurers understand that a long time can pass before a client makes their claim against you. Many companies will assign a retroactive date that starts prior to the start date of your policy. You can be covered for any incidents that happen from this date as long as your client makes the claim during the current policy.
Many companies allow you to extend your policy’s coverage after you cancel your policy. You may pay an extra premium for this benefit, sometimes called tail coverage. Tail coverage may only last a short time, such as one year.
Professional liability policies help medical, legal and business professionals pay for court expenses if a client sues over previous work. To keep your career in good standing, make sure you have the best insurance protection for your business.
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