What does a professional liability policy cover?  

A customer or client can sue you if they think you made a mistake in your professional services that caused financial loss. If you make an error in your professional services, professional liability insurance will help cover you and your company. This type of coverage is also referred to as errors and omissions insurance (E&O) or, in some instances, professional indemnity insurance.  

 

Professional liability insurance will help cover claims of misrepresentation, inaccurate advice, and negligence. If a customer or client believes you have made a mistake, they sue your business – even if you didn’t do anything wrong. To avoid paying expensive legal defense costs out of your own pocket, you will need a professional liability policy.  

 

Professional liability insurance coverage can be helpful for your business if, to cite a few examples: your client loses thousands of dollars due to a clerical error by your accounting firm; you failed to deliver flowers to a wedding on time and a client sues your florist shop for errors in your services; or your real estate firm sold a townhouse recently to a couple who was hoping to start a daycare, but upon moving in, the townhouse association told the couple the property couldn’t be used as a business and the couple files a lawsuit against you for negligence.  

 

What is the difference between general liability and professional liability?  

It is important to know that professional liability insurance does not cover everything. For instance, it will not help your business with claims of property damage or bodily injury. In that case, you will need a general liability insurance policy to help cover your costs if you damage another person’s property or if someone is injured on your business premises.  

 

The key difference between professional liability and general liability is the kinds of risks each covers. Professional liability covers risks that are more abstract, like errors and omissions in the services you and your business provide. General liability, however, covers physical risks, like property damage and bodily injuries.  

 

Professional liability insurance will help to protect your business if your customer or client claims financial damage from the service that you provide, and can help cover your legal defense costs if a bookkeeper makes a clerical error that will cost your client thousands of dollars; if a web developer makes an error on your client’s e-commerce site that results in missed sales opportunities; and if your accountant files a wrong tax return for your client that results in a penalty fee.  

 

While general liability will help cover bodily injury if someone gets hurt at your business, it doesn’t include your workers’ injuries, which is when a workers’ comp insurance policy comes into play, covering you if your employees suffer work-related injuries and illnesses. General liability will also cover medical payments if someone suffers and injury on your business’s property; property damage caused by your employees or business; reputational harm if you get sued for libel, malicious prosecution, wrongful eviction, slander, privacy violations, and more; and advertising mistakes for lawsuits for copywriting infringement in your ads.  

 

What is the best professional liability insurance?  

In the event that a client accuses you of making a mistake that leads to a financial loss, you will need professional liability insurance. Also called errors & omissions, these policies can cover industry-related risks. According to New York-based Fit Small Business, these are the eight best professional liability insurance companies in the U.S. in February 2021: CNA for the top professional liability insurance company; The Hartford was named the best for business consultants and tech consultants looking for contractual liability coverage; Travelers was named best for accountants, financial planners, credit counselors, and technology consultants; Hiscox was considered the best for independent contractors looking to save; Embroker won for small law firms wanting quick coverage; AIG was named best for broadcasters and publishers with media liability exposures; Cover Wallet was named the best for comparing coverage to get the best deal; and The Doctors Company was the best for healthcare providers needing E&O insurance for added services.  

 

What is Malplacement liability?  

Malplacement liability will cover you for the costs that you are legally obligated to pay due to an error, omission, or act that arose from your responsibilities for qualifying and arranging suitable work for other massage therapists. If a massage therapist you placed was misrepresented their qualifications or was alleged to be negligent, malplacement liability coverage might apply.  

 

Who needs professional indemnity cover?  

Before deciding that your business needs professional indemnity insurance, check to see if your professional body or regulator requires you to hold a policy. It’s likely that you are obliged to get professional indemnity insurance if you work in architecture, chartered surveying, or accountancy. Your client contracts might also require that you have a level of professional indemnity insurance. Although that may not be the case, you may choose to get professional indemnity cover, for your own security and to reassure potential clients.  

 

For businesses that give advice, handle client data and intellectual property, and provide a professional service, professional indemnity is a particularly popular insurance.

 

Is professional indemnity insurance compulsory?  

Professional indemnity insurance is not compulsory under law. The rules of some professional bodies and regulators, however, mean it is compulsory for certain professions, including financial advisers, architects, solicitors, and accountants. It is also required by some client contracts.  

 

The only business insurance that is required under the law is employers’ liability insurance, which is legally required for most company’s with a staff. If you are trying to figure out if professional indemnity insurance is compulsory for your business, check the guidelines from your professional body and your regulator, as well as your client contracts.