Running a business is not for the faint of heart. There are mountains of risk involved, which is why entrepreneurs always tend to be the brave and the bold of society. Successful business owners experiment with new ideas, knowing full well that failure is a possible outcome, and it could cost them a lot financially, yet they march on into the unknown.
While taking chances is simply a part of life for business owners, there are certain kinds of risk that should be avoided if possible, which is where professional liability insurance comes in handy. If you are new to owning a business, you might not have heard of this insurance before. Here is a quick guide to explain some of the basics of professional liability insurance that will demonstrate how valuable one of these policies can be to your company.
What is Professional Liability Insurance?
This type of insurance product is designed to help protect you and your company from being sued by clients and customers as a result of any advice, expertise, or services rendered. A client could say that the service or advice you offered harmed them in some manner, due to an act of negligence, some kind of error, or an omission of important information.
Without having the proper protection, a lawsuit could be a serious hit to your profit margin and possibly put you out of business.
Who Needs to Buy This Type of Coverage?
Not every type of business owner needs to have professional liability insurance. Retail businesses that sell a tangible product of some kind would not need this coverage. However, if your business offers any type of advice, recommendations, or services, you need to purchase a policy in order to help offset the risk associated with certain lines of work.
A few good examples of professions that need this type of insurance would be financial professionals like an advisor or insurance salesperson, architects, real estate agents, accountants, and dentists.
Why You Need to Buy Professional Liability Insurance
Anyone who is a professional in a specific industry is expected to have expert-level training and knowledge of their area of expertise. As an expert in your field, your customers count on you to provide services that match your qualifications, and any time a customer feels you have failed to do that, it puts you at risk for legal action.
A lawsuit is bad for business all-the-way-around. Court costs, settlements, and bad publicity could force you to shut your doors. Having professional liability insurance will help protect you from the financial devastation of a legal claim, enabling you to keep your company up and running.
What Does This Insurance Cover?
Professional liability insurance protects you from several types of risk. The insurance will protect you from cases involving a faulty service. A faulty service is simply an error that you made when providing your services or advice to a client. It will also cover instances where you may not have performed a service that you promised to perform for a customer. This is known as an omission.
One of these policies helps cover court expenses, such as your legal defense, and will also cover the cost of damages awarded to your customer, up to the policy limit.
A professional liability insurance policy is considered to be specialty coverage, which means it is not included in your business owner insurance. As you can see, running a business, especially one that offers advice or professional services, puts you at great risk should a client feel dissatisfied with your work. Rather than take the risk of being sued and having expenses come out of pocket, purchase one of these plans and rest a bit easier knowing that if something should happen, your business is protected.