What is Professional Liability Insurance?
According to the U.S. Small Business Administration (SBA), Office of Advocacy, there are 2.7 million small businesses in Texas as of 2019, and they constitute 99.8% of all businesses in the state.
Increasing competition has led to clients becoming more finicky about the services and products they receive. Regardless of how meticulous you are, mistakes can occur, which can snowball into a dispute and consequently a claim. Every time you give clients advice or take on work from them, you inadvertently take on exposure to liability as well.
This is where Professional Liability Insurance steps in. Also referred to as Errors and Omissions Insurance, it is a unique, comprehensive coverage that is extended to businesses or individuals who provide expert advice or services.
If a product you have designed, fails to work or if your advice has resulted in a financial loss for the client, you could be slapped with a lawsuit asserting that there was an error or omission in your work or that work wasn’t up to par. But if you are covered with professional liability Insurance, it safeguards you and your business from third party claims brought on as a result of professional error or negligence.
What does Professional Liability Insurance Cover?
Even if the claim is baseless, court costs and legal fees alone can run into thousands of dollars. For small business owners, the financial burden could also impact operations.
Depending on the type of coverage you choose, and the limit agreed to in your insurance contract, professional liability Insurance will save you from:
- Legal Costs – Securing competent legal representation doesn’t come cheap, and lawyers typically charge an hourly rate.
- Court Expenses – Including filing documentation with the court, underwriting charges, administrative costs, and other related expenses.
- Settlements – If your client agrees to settle out of court, you may be saved from a long-drawn-out litigation process, but you will nevertheless have to make a payment depending on your attorney’s advice.
- Judgments – On the other hand, if your case goes to trial and is found in favour of the plaintiff, you will have to pay the amount as determined by the court.
Who needs Professional Liability Insurance?
Professional liability Insurance applies to businesses and individuals who provide professional services, including designing solutions, giving clients advice, making educated recommendations or those who represent the needs of others.
Professions that need Professional Liability Insurance include, but are not limited to:
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How Much Does Professional Liability Insurance Cost?
Regardless of the type of industry, in Texas, the average annual cost of Professional Liability Insurance for small businesses is $894. However, each professional liability insurance policy is different.
Factors that will determine the cost of your Professional Liability Insurance premium are:
- The nature of your business and degree of risk involved – Like any type of insurance, the higher the risk, the higher the cost to meet those risks.
- The size and turnover of your business – Larger projects or more work volume increases your exposure to risk.
- Individuals being covered – The person’s qualifications or suitability to carry out their duties and if any previous claims were brought against that individual
- Your previous claims history
- The amount of insurance coverage required
As a specialist in your field, you will require unique coverage that is designed to meet specific challenges in your profession. And professional liability insurance will give you that invaluable protection you need.