Nobody is perfect. Everyone makes mistakes from time to time. For some professionals, however, a small mistake or omission can lead to big losses… and even bigger lawsuits.
If you’re in a service-oriented profession, like an accountant, attorney, or real estate agent, professional liability insurance could be just the thing you need to make sure one tiny mistake doesn’t put you out of business for good.
Here are seven benefits of professional liability insurance:
1. Professional Liability Protects a Wide Variety of Professionals
You don’t have to be an attorney or accountant to benefit from the coverage of professional liability insurance.
This coverage can help anyone who offers a service for a living.
So, who needs professional liability? How about:
- Accountants
- Advisors
- Agents
- Architects
- Attorneys
- Brokers
- Consultants
- Contractors
- Designers
- Engineers
- Photographers
- Marketing agencies
- Medical professionals
- Videographers
- Website developers
- And many, many more...
2. Professional Liability is Designed for Financial Losses
As a business owner, you have plenty of insurance policies in place to protect against physical losses or damage. Commercial property, general liability, workers’ compensation, and commercial auto policies can all offer some sort of protection against a physical injury or property damage. Yet, as necessary as these policies are, they all fall short in one aspect:
They won’t protect you if a client sues you for a financial loss.
Only professional liability insurance is designed to cover third-party economic or financial loss resulting from your service or advice.
Let’s say you’re a financial advisor whose advice resulted in a larger-than-expected tax obligation for your client. Your client feels that following your professional advice was a costly mistake.
And now they’re taking you to court.
Your other business insurance policies aren’t designed for this type of loss, and you won’t be covered for this scenario if you’ve only got a general liability policy in place.
3. Professional Liability is Designed for Lawsuits
There’s no doubt about it; going to court is costly.
Whether the lawsuit is frivolous or legitimate, court costs can add up quickly.
Attorney fees, filing fees, deposition fees, witness fees, settlements, and judgments… not to mention the time you have to take away from your business to meet with your attorneys and be in court.
Professional liability is designed to protect your business against the high cost of a lawsuit. If you’ve got coverage, your lawsuit costs are covered (less your deductible) if you get sued by a client.
4. Professional Liability Can Even Cover Services You DIDN’T Provide
Did you know that you could get sued for not providing a service to someone?
You’re a wedding videographer who had to cancel a job because of an emergency at home. Most people would understand. You even referred a friendly-competitor who was able to take the job at the last minute. But the bride hates the results and now she’s suing you for a failure to live up to the contract and provide your service.
Professional liability insurance is also referred to as “errors and omissions (E&O)” coverage. Some of the most common examples of E&O claims are:
- Breach of contract
- Failure to render services
- Omissions or errors
- Significant financial loss
Even if you never provide a service, you could still be on the receiving end of a lawsuit.
5. There May be a Professional Liability Coverage Specifically Tailored for You
E&O insurance can be tailored for specific industries.
Medical professionals are typically required to have a special type of professional liability coverage known as medical malpractice insurance. Medical malpractice insurance can cover lawsuits arising from allegations of medical neglect or malpractice, such as misdiagnosis, surgical errors, and medication errors, to name a few.
Attorneys can get legal malpractice insurance, which is also known as lawyers’ professional liability (LPL) coverage.
Contractor professional liability insurance (CPL) covers errors that result from the design and engineering process of design-build projects. CPL isn’t just for construction professionals, it can also protect architects, designers, engineers, and other building specialists.
6. Professional Liability Coverage Could Keep Your Doors Open
Let’s face it: we live in a litigious society.
Statistics show that between 36% - 53% of small businesses are involved in at least one litigation in any given year, and 90% of all businesses are involved in litigation at any given time.
Data from the SBA concludes that 15.8% of small businesses don’t survive lawsuits.
Small business owners involved in lawsuits reported that litigation costs ranged from $3,000 to $150,000, and they felt they needed to “recoup” these losses by cutting operating costs or getting more customers after a lawsuit.
And some business owners have no choice but to close up shop after an expensive, lengthy, and emotionally exhausting litigation process.
Professional liability coverage could be the difference between using up all of your cash reserves or keeping the doors open and surviving after a lawsuit.
7. Professional Liability Coverage Could Help Your Business Succeed
Sometimes the biggest benefit of an insurance policy isn’t what it can help your business save, but how it can help your business bloom.
Professional liability insurance could help you take your business to the next level. As your business grows, so do the risks. Larger clients may require you to carry this policy, requiring proof of coverage before signing a contract.
For other clients, proof of coverage could give you something over the competition and become a selling point demonstrating your dedication to professionalism.
If your business is built on providing a service, then professional liability insurance is a must-have policy to protect you against lawsuits for financial losses, errors, or mistakes. Nobody is perfect - and it pays to have the right protection in place so that one small slip won’t cost you big.