Do All Businesses Need Professional Liability?
The need for professional liability insurance is not always clear cut. In general, if you offer a service to customers, you should be equipped with this type of business coverage.
Even the best employees make mistakes. Although you may be confident in your services, a client could be dissatisfied or claim your work caused harm to their business. These instances may be rare but could be financially devastating if they lead to a lawsuit.
Rather than regret a lack of coverage later, factor the following points into your decision.
What Professional Liability Insurance Offers
Professional and general liability both cover common business risks and complement one another to assume a wider range of perils. Yet, only professional liability insurance factors in potential issues and financial consequences you could face with clients.
On a basic level, professional liability protects your key assets when a client accuses you of making a mistake. Should you face allegations of negligence, this coverage ultimately helps you stay financially afloat.
Yet, professional liability insurance does not cover everything. Coverage will not extend to:
- Intentionally dishonest or criminal acts
- Illegal behavior
- Bodily injury
- Copyright or patent issues
- Property injury
- Medical expenses
Who Needs Professional Liability?
Professionals offering a specialized service or who routinely come in contact with customers and clients tend to have the greatest risks. Especially if you own a small business, you often have more to lose. This may include the following professions:
- Real estate
- Finance professionals
- IT professionals
- Marketing and advertising professionals
For Contractual Reasons
Without professional liability insurance, you could lose business. Many clients, especially large businesses hiring smaller subcontractors, require outside parties to have professional liability coverage. Otherwise they assume all the risk, which is too great of an expense. To anticipate what a client may require, equip yourself with professional liability insurance.
You Employ a Staff
Hiring a new employee allows you to benefit from his or her skills, but you assume some degree of risk as a business owner. The more staff you hire, the greater this risk becomes. Even if you could manage alone, having a team makes you more efficient. To anticipate any potential or alleged mistakes your staff could make, prepare with professional liability.
Required For Your Industry
A handful of industries require its professionals to purchase malpractice insurance, including the medical and legal fields. Based on Federal Acquisition Regulations (FAR), any businesses working on government products are legally expected to have professional liability insurance. Essentially, if a business makes their insured status known to clients, the company needs to support those claims with adequate coverage.
Never a One-Off Policy
Although certain clients and projects have greater risks than others, coverage should not be dropped when a contract ends. After all, you never know when a client you’ve had for years may make false allegations about the quality of your work.
In this case, professional liability only covers on a claims-made basis. If you weren’t covered when the client alleged the mistake happened, your carrier won’t assist with your claim.
Is your business prepared to face an unexpected lawsuit? Protect your company against future risks with professional liability insurance. To discuss your policy options with an Ion Insurance agent, contact us today.