The cost associated with client court cases regarding professional malpractice surmounts to millions each year. Ranging from defense costs, fees, expenses, and court awards, businesses and professionals are at risk of stopping their operations and making a severe financial loss when facing a professional liability case. That is why such entities and individuals should consider getting a professional liability insurance cover.
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What is a Professional Liability Insurance Cover?
Professional Liability Insurance cover, popularly known as the Errors and Omissions cover (E&O), is a cover taken by an insurer to protect them from the cost that may arise due to professional negligence. Professional Liability Insurance (PLI) is also known as Professional Indemnity Insurance.
The Professional Liability Insurance coverage encompasses the defense cost, the fees and expenses, and the court awards that may arise in a civil court proceeding. It is more of a liability insurance cover that protects the policyholder against claims made by a client who believes that they have suffered financial loss or health implications due to negligence, errors, or omissions in the service provider’s services.
How does a Professional Liability Insurance Policy Work?
A client takes up the insurance policy from an insurance company or provider. Once the client or business becomes a policyholder, they have coverage against any legal claims made against them during the time, as depicted in the insurance contract. During this period, the policyholder will be indemnified of any cost that may arise from accusations made of professional negligence.
Some insurance companies may offer coverage for any cases sued against the policyholder before the contract matures or is considered active. They are known as retroactive date coverage. Not all companies provide retroactive cover; it depends on the terms of the insurance contract. Professional Indemnity Insurance does not cover criminal cases.
Who Needs Professional Indemnity Insurance?
Be advised that all service-oriented businesses should take out a Professional Liability Insurance coverage policy. In some states, Professional Liability Insurance is a requirement for service-centered enterprises. Additionally, some clients may request it as a requirement before engaging in any business transactions.
Such service-centered entities take up a Professional Liability Insurance policy as one can never be too careful. No matter how many years of expertise in your field, one may face a client court claim that arises due to negligence, errors, or omissions. Customers may place a civil suit because they believe that:
- A negligent act on the business or professional side led to severe financial loss.
- A false advertisement or inaccurate information given by the industry or professional led to severe financial or health implications.
- The company or professional intentionally misled them for their financial gain.
- There was a violation of the customer’s trust, which led to detrimental financial or health implications.
What Are the Most Common Professional Liability Insurance Policies?
- Architects Insurance
- Computer Programmer & IT Consultant Insurance
- Counselors Insurance
- Engineering Insurance
- Malpractice Insurance
- Medical Malpractice Insurance
- Notary Insurance
- Paramedics Insurance
- Personal Trainer Insurance
- Police Officer Liability Insurance
- Private Investigator Insurance
- Security Guard Insurance
- Teacher Insurance
What to Consider When Choosing a Carrier for Professional Liability Insurance?
Premium Cost
Although cost plays an important factor in choosing the ideal insurance company, do not compromise on coverage. It is essential to sample the contracts’ terms and the price offered by various insurance companies to get a rough estimate of the cost. Choose a cover that will best fit the budget and provide maximum coverage.
Policy Limits and Deductible
As per the terms of the insurance policy limit is set on two bases. The limit on the amount of money that the insurer will spend per claim case, also known as the per-occurrence limit. The limit on the amount of money spent across several claims, also known as the aggregate limit. These two limits are set during the contractual period and are constant. Coverage limits reassessment will happen upon renewal.
Defense Expenses
There are two policies under this: the Defense Outside the Limit Policy and the First Dollar Defense. The Defense Outside the Limit Policy allows the insurer to cover the defense cost in attorney expenses. Also, the policy may include the cost associated with court verdicts and settlements. However, the First Dollar Defense means that the insurer will not be accountable for the cost related to attorneys and the Defense.
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Insurance Company Experience
Choose a company that has shown to have a history of paying Professional Liability Insurance claims. They should have vast experience in dealing with settling and dealing with insurance claims.
What is the Average Cost of Professional Liability Insurance?
In 2019, the estimated total average cost for a Professional Indemnity Insurance coverage was estimated to be only $46/month. However, this price varies depending on the insurer and the insurance cover taken. Other factors that may affect the pricing include:
- Claims history
- Size of the business in terms of the average number of clients or the number of employees
- Geographical Location of the business
- Business or individual’s credit score
- Type of measures put in place to limit the number of potential errors in the business
What Are The Common Requirements?
Depending on the insurer, the company may ask for:
- Registration documents of the business or the individual professional
- Documentation on the quality control processes
- The Copies of the contracts used in the industry sent to the client
- The company’s list of employees
- Any information or documents from previous errors or omissions
Businesses or individuals practice the utmost honest during the contractual period as any form of dishonesty will make the insurance contract be declared null and void. Additionally, having a Professional Liability Insurance cover does not give an individual or business leeway to engage in any form of negligence. Instead, they should continue delivering high-quality services to minimize the chances of being sued.
What are the Benefits of Having a Professional Liability Policy?
- An individual or business will incur little or no financial cost in case a client sues them.
- An individual or company can focus on its operations instead of continually worrying about the civil case procedure outcome.
- In a civil case, lawyers specializing in this type of litigation will be sent by the insurer to represent you.
- A Professional Liability Cover creates the right company image. It increases potential clients’ confidence in investing or engaging in business with your company.
- In the case of clients’ false claims, your company or yourself will be represented in a court having minimal impact on you or your company.