No one intentionally makes a mistake in their work. Still, if you provide professional service, there may come a time when an error or omission causes a financial loss to a client. That’s where professional liability insurance comes into play, protecting you from those claims. Most people are familiar with this type of insurance for doctors, lawyers and accountants. However, almost every service profession should consider some form of liability insurance, from aestheticians and hairstylists to wedding planners and website designers.
What Professional Liability Insurance Covers
On the surface, people often confuse professional liability insurance and commercial general liability insurance. In fact, the two coverages are different. Commercial general liability insurance covers physical injury and property damage, while professional liability covers a claim of financial loss due to an error made by you. Professional liability insurance protects you against lawsuits filed by a client who claims a loss caused by your negligence or faulty act. These types of claims can be devastating to a small business if you have to bear the cost of legal fees and – if you really did make a mistake – the cost of a settlement.
Insurance for Any Profession
In some states (though not in Michigan), doctors are required to carry malpractice insurance, which is a form of professional liability insurance tailored to the needs of medical professionals. Accountants, financial planners, architects, engineers, and lawyers may be required to carry Errors and Omissions insurance in some jurisdictions. Like malpractice insurance, errors and omissions is a form of professional liability. However, virtually any person or business that is compensated for providing a service, consulting or advice should consider errors and omissions insurance. Professional liability insurance takes on many forms, depending on the business it covers, so there is a flavor for every professional. For example, website designers’ and software developers’ coverage will differ from coverage for interior designers, wedding planners, or management consultants. Get the help of an insurance expert to get the right type of coverage.
Is it Worth the Cost?
Doctors, lawyers and financial professionals tend to pay a lot for malpractice insurance, in part because the potential cost of their mistakes is very high. In other industries, the potential for loss is lower and so too are the premiums. Ultimately, the cost of liability insurance or errors and omissions insurance will be small compared to what it costs if a client files a lawsuit. Most professionals, when looking closely at the potential cost, realize that their business would struggle to survive a claim without insurance. So, in general, the peace of mind you’ll get from having the insurance outweighs the cost.
Unsure of your need for professional liability or errors and omissions insurance? Contact an insurance professional who can help you weigh the options and can find the best policy at the best price.
