Professional liability insurance is often referred to as errors and omissions or “E & O Insurance” or malpractice insurance. While a general liability policy covers against property damage or bodily injury to a third party, professional liability insurance covers you if a client or customer claims your services resulted in a financial loss.
Many professional service businesses choose to add professional liability insurance as part of the overall business insurance package. Accountants, attorneys, consultants, architects to name a few should carry Professional E&O. Typically these policies have coverage limits that are issued in million dollar increments and the deductibles range from $1000 – $25000 per claim. A million dollar limit may sound like a lot, but these claims often start even higher. You should be aware that these policies are normally sold on a claim made basis, and the policy must be in force.
Furthermore, if you cancel a policy it is imperative to have requested and received an extended reporting period. Otherwise, if you cancelled the policy and later a claim was filed against your company, even though coverage was in place at the time of the event, the event is not covered. With your professional liability policy it is important to understand all the terms and definitions. If need be, have the policy reviewed by an attorney who specializes in business law.
Professional liability insurance is normally sold by a specific industry or industry segment. A realtor’s policy will be different than an accountant’s that will be different from a medical professional, etcetera. It is important to review what the standards are in your particular service field.
Know what the exclusions that is in the policy and insure you choose the right policy to cover the most risk exposure. Your commercial insurance broker should walk you through the coverage and seek quotes from various carriers to maximize value and protection. In this day and age, you need to be vigilant from a disgruntled client making a false accusation as well as bona fide claims of damages.