Litigation costs small businesses in the U.S. about $100 billion each year. Many small businesses find that they can’t afford the costs of litigation, or they have professional liability insurance to cover the bills.
What usually happens is that business owners find themselves underinsured because they don’t understand what liability insurance covers.
What does professional liability insurance cover? Read on to learn everything you need to know about professional liability insurance.
What Does Professional Liability Insurance Cover?
Professional liability insurance overs mistakes, negligence, or malpractice when performing a professional service. This is also known as errors and omissions insurance. This type of insurance would cover the financial damages a client suffered as a result of your errors.
It also covers you in cases where you are being sued because you didn’t deliver your service on time. Web developers and contractors may have this happen if they have months-long delays in delivering the final product.
Professional liability coverage needs vary by industry. A business coach would have many different needs than a contractor.
A contractor would be better served by having professional contractors liability insurance. A business coach would need errors and omissions insurance, which covers them in case the advice they provide causes a client harm.
There’s also general liability insurance, which covers property damage and physical harm caused by your company. A common example is if a customer slips and falls at your place of business. General liability insurance covers medical bills, loss of income, and legal fees.
Be aware that most insurance companies consider professional liability insurance and general liability insurance to be two separate policies.
What’s Not Covered Under Professional Liability Insurance
As you can see, professional liability coverage has a narrow scope of coverage. It can be more helpful to look at what isn’t covered to fully understand how insurance works.
For example, if your business was hit with a libel or slander claim, that wouldn’t be covered under professional liability insurance. General liability coverage would cover this.
A business that uses cars to get from one client appointment to the next isn’t covered if an auto accident occurs. If the car is owned by the business, then you’d need a separate auto insurance policy. For personal cars, then you’d refer to your personal auto insurance carrier to make sure that you have coverage.
Businesses are under threat of data breaches and cyberattacks. You would need to have a separate cyber insurance policy to cover losses.
Businesses that have to interrupt services due to natural disasters or other unexpected events can cover some losses with business interruption insurance.
Get Full Business Insurance Coverage
How can you make sure that you have comprehensive insurance coverage for all of your business needs? You have to start by knowing what different policies cover, including professional liability insurance.
What does professional liability insurance cover? It covers a few things, such as damages suffered by clients as a result of errors or negligence. You’re covered if you don’t deliver your services according to the terms of the contract.
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