Every small business faces a unique set of risks that insurance can often help protect them against. For businesses that provide a professional service, advice, or represent their clients’ interest on their behalf, Professional Liability insurance may be an essential part of this protection.
What is Professional Liability insurance?
A Professional Liability insurance policy (also known as Errors and Omissions or E&O insurance) is an essential policy that protects you and your company in case of a lawsuit due to alleged professional wrongdoing.
This insurance coverage helps shield your business finances against certain types of liability claims, by paying attorney fees, court costs, settlements, and judgments.
Why you should have Professional Liability insurance
There are many reasons why small businesses consider Professional Liability insurance to help protect their business. Here are eight:
1. We live in a litigious society
The question often isn’t will you be sued, but when. One study by the Small Business Administration found that in a given year, anywhere from 36% to 54% of small businesses surveyed had a lawsuit brought against them. Given these numbers, the chances of being sued may not be something you can ignore.
2. Mistakes happen
Even the most careful person can sometimes make a mistake. As a professional service provider, any mistakes that you make could hold more weight. An error—no matter how small—can translate to large financial losses for a client. If they decide to file a lawsuit and seek compensation for their loss, you could be stuck with the bill without the protection provided by Professional Liability insurance.
3. It covers a variety of claims
You may be confident in your ability to catch any mistakes, errors, or omissions in your work before they become a headache for your clients. However, there are other liability events that fall under the umbrella of Professional Liability insurance. These include:
- Breach of contract
- Undelivered services
- Missed deadlines
Professional Liability insurance can help shield you if a client claims one of the above as a result of your work. This can be especially useful in cases where aspects of a project may not be completely under your control, such as missing a deadline or undelivered services.
4. You could be held liable, even if you work for a company
If you work for a small business but don’t own it yourself, you may think that the company will protect you against liability lawsuits. The client will just sue your employer, right? This is not always the case. Clients often sue multiple parties, so you could be sued individually along with the business you work for. While your employer may have a Professional Liability policy, you may not be fully covered under it. You should check with your employer if you are fully covered under their policy, if not, having your own Professional Liability insurance could help provide you with more complete coverage.
5. It can protect your personal savings
Lawsuits are often expensive. Attorney’s fees and court costs add up fast, particularly if the suit drags on for months (or even years). Then if you are ordered to pay a settlement or judgement to the client, you’ll be hit with another large bill. These costs can easily drain your business accounts but could also put a strain on your personal savings as well. Professional Liability insurance pays legal expenses resulting from a claim, including settlements and judgements, so you don’t have to pay out of pocket.
6. It can protect your professional reputation
Professional Liability insurance can help protect you financially, but it can also help protect your reputation as a professional service provider. Having a policy shows clients that you value your good name and the work that you do. It also signals that you are prepared to defend them in court, if need be.
7. It can cover past events
Many Professional Liability policies are written as “claims-made” policies. This means that they cover events from when the claim is made, not necessarily when the work was done. Coverage will typically begin from a retroactive date agreed upon with your insurer. This helps protect businesses for past work, even if the client makes a claim years after their project has ended.
8. You’ll be covered even if a claim is baseless
Clients sometimes make liability claims that are baseless. They may name you in a lawsuit where you are not actually at fault, and getting the suit dismissed or fighting their claim can be expensive. Fortunately, Professional Liability insurance will cover you even if a baseless claim is made against you.
Professional Liability insurance for small businesses
As you can see, Professional Liability insurance can help small businesses better protect themselves against potential client claims. It can help shield your business and personal finances, safeguard your professional reputation, and provide overall peace of mind as you work for you clients.
If you are ready to find Professional Liability insurance that fits your business needs, visit the BizInsure website to learn more.