Professionals Liability Insurance: What it Covers, Types & Costs
What Is Professional Liability Insurance?
Professional Liability Insurance (PLI) is a form of coverage designed to safeguard professionals such as accountants, lawyers, and physicians from claims initiated by their clients due to negligence or other professional shortcomings.
This insurance is crucial for individuals with specialized expertise, as general liability policies do not provide protection against claims arising from errors, malpractice, mistakes, or misrepresentation.
How Professional Liability Insurance Operates
The nomenclature of professional liability insurance may vary depending on the profession. For instance, it may be referred to as medical malpractice insurance in the medical field or errors and omissions insurance for real estate agents.
This specialized coverage is not typically included in homeowners’ endorsements, in-home business policies, or business owners’ policies.
Professional liability insurance policies usually operate on a claims-made basis, meaning coverage is applicable only for claims made and events occurring while the policy is active.
Alternatively, there are occurrence policies, where coverage extends to incidents that occurred during the coverage period, even if the policy expires before a claim is filed.
However, occurrence policies are relatively uncommon.
Standard professional liability policies indemnify the insured against losses resulting from claims made during the policy period due to covered errors, omissions, or negligent acts committed in the course of the insured’s professional business.
Inclusions in Professional Liability Insurance
Coverage under professional liability insurance specifically excludes criminal prosecution and various forms of legal liability under civil law, focusing only on those delineated in the policy.
Examples of liabilities not covered include employee injuries, discrimination lawsuits, business property damage, and customer injuries or damages.
Conversely, professional liability insurance covers liabilities such as mistakes, errors, and oversights in services provided, undelivered services, missed deadlines, negligence, failure to meet standards, and breach of contract.
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How Much Does Professional Liability Insurance Cost?
Determining the cost of professional liability insurance hinges on various factors such as your geographical location, industry, and your claims history.
Additionally, the number of employees in your business and the duration of your business operation can impact the policy’s pricing.
Similar to other insurance types, coverage limits and deductibles play a role in shaping the overall cost.
According to data from insurance provider Insureon, the median monthly cost for professional liability insurance is $59, with annual premiums typically ranging between $500 and $1,000.
Who Needs Professional Liability Insurance?
Companies offering services should ideally have professional liability insurance (PLI) covering their operations.
However, for small business owners providing professional services independently or contracting with other businesses, acquiring this insurance is crucial.
Professionals such as engineers, insurance agents, real estate agents, brokers, architects, accountants, and consultants, including those in management and IT, should consider obtaining professional liability insurance.
Who Should Get a Professional Liability Insurance Policy?
Professionals and businesses offering services to clients should prioritize obtaining a professional liability insurance policy.
These policies safeguard against claims stemming from professional errors, mistakes, judgments, or service delivery failures.
What Are the Two Basic Types of Professional Liability Policies?
Professional liability insurance comes in two primary types: claims-made and occurrence. Claims-made policies require the policy to be active when the event and lawsuit occur, while occurrence policies cover qualified claims arising from incidents during the active policy period.
Conclusion
Professional liability insurance is indispensable for small business professionals like doctors, lawyers, accountants, and architects.
It provides protection against the repercussions of professional mistakes, acknowledging that errors can occur irrespective of a professional’s experience or diligence.
