Professional Liability Insurance
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Professional Liability insurance for Texas Small Businesses
According to the U.S. Small Business Administration (SBA) Office of Advocacy, there are 2.8 million small businesses in Texas as of 2019, and they make up 99.8% of all businesses in the state. These small businesses added just under 227,500 net jobs to the state economy, making them a key driver of economic growth in Texas.
The top five industries for Texas small businesses are:
- Health Care and Social Assistance
- Accommodation and Food Services
- Professional, Scientific and Technical Services
As more and more small businesses take advantage of this booming Texas economy, many may find that they need a safety net in place to help protect their growing enterprise. Professional Liability insurance in Texas is one way that businesses can help safeguard what they are building.
What is Professional Liability Insurance?
Increasing competition means clients are becoming harder to please when it comes to the services and products they receive. Regardless of how meticulous you are when completing your work, small mistakes 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 known as Errors and Omissions (E&O) insurance, this type of policy protects your business against claims of negligence, misrepresentations, or mistakes. Professional Liability claims are typically made by clients who allege some form of financial damage as a result of your services, products or employees.
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 liability lawsuit. This might assert that there was an error in your work or that the work you performed was not up to par. But if you are covered with Professional Liability insurance in Texas, you and your business can be protected from third-party claims brought as a result of a professional error or negligence.
What does Professional Liability Insurance Cover?
Even if a 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 their operations. In worst case scenarios, liability claims can lead to bankruptcy and even business closure.
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 favor of the plaintiff, you will have to pay the amount as determined by the court.
Importantly, Professional Liability insurance in Texas covers you even if you are not at fault. Baseless claims can be just as expensive to resolve as those that do have merit. A Professional Liability policy will help you defend your business and professional reputation by paying the above, so you are not left completely out of pocket for these costs.
What is not covered?
Professional Liability insurance helps protect many types of businesses from common risk exposures they may face. However, it’s important to know that it does not cover your business for everything. You may need to seek out other forms of coverage for events, such as:
- Damage to your commercial premises or property
- Damage to a client or other third party’s property
- Employee work-related injury or illness
- Third party injuries on your premises
- Business interruptions
BizInsure offers other types of coverage that can help shield your business against these and other common risks faced by small businesses. Texas small business owners might also want to consider General Liability, Workers’ Compensation, and a Business Owner’s Policy to more fully protect them against a wide array of exposures that may affect their company.
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 may need Professional Liability insurance in Texas include, but are not limited to:
|Home Care Providers and Businesses||Yoga Instructors|
As you can see, a wide range of occupations and professions could benefit from a Professional Liability policy in Texas. If your small business provides advice or services, represent others’ interests on their behalf, or engages in other activities that could leave you open to liability claims, then you may want to consider putting a policy in place to protect you and your business.
Are businesses required to have Professional Liability insurance in Texas?
State law does not mandate Professional Liability insurance in Texas for small businesses. However, there may still be instances where a policy might be required to do business in the state.
Professional associations sometimes require their members to hold minimum levels of Professional Liability coverage to become licensed or work in the field. The website for any professional association that you belong to should have more information about their Professional Liability insurance requirements, if any.
Clients may also require you to have Professional Liability insurance to work with them. This will typically be written into a business contract. You may be required to show proof of insurance before signing the contract or beginning work on the project.
It may still be wise to have a Professional Liability policy even if you are not required to have one. Without it you will likely need to pay any liability claims from your own pocket, which could be financially devastating to your business and personal savings as well.
How much does Professional Liability Insurance cost?
The cost of Professional Liability insurance in Texas can vary widely. Each Professional Liability policy is different, as they are tailored to the unique needs of the small businesses they cover.
Insurance companies use a variety of factors to help determine the amount you will regularly pay for Professional Liability insurance (commonly known as the “premium”). Some 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.
- The individuals being covered – The person’s qualifications or suitability to carry out their duties, and if any previous claims were brought against that individual
- The industry you work in
- 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. Professional Liability insurance could give you that invaluable protection you need.