Professional Liability Insurance

Professional liability insurance is primarily for businesses that offer professional advice and service oriented products. The insurance protects the business from bearing the full cost of litigation expenses in the event a claim of negligence is lodged against them by a client or other third party.

Professional liability insurance focuses on the alleged failure to perform as required and causing a financial loss to the client. Coverage under professional liability insurance does not include criminal causes and possible prosecution. Some states require business to have professional liability insurance and may even dictate the amount of insurance needed. Some business may require a consultant to have professional liability insurance as a matter of contract and practice.

Professional liability insurance is known under different names. For instance, in medicine liability insurance is known as medical malpractice insurance. A stable owner who purchases professional liability insurance will purchase what is called care, custody or control insurance or bailee coverage. A lawyer would purchase legal malpractice insurance. Professional liability insurance is sometimes errors and omissions insurance. The names are different but the intent is the same.

Liability insurance policies are based on claims made. That means claims made during the life of the policy will be considered. The policy provides indemnity to the insured party against loss stemming from neglect, omission or error during the course of the performance of professional business. Claims made before the insurance was in place may not be covered; however, some insurance policies may have a retroactive date that would allow claims brought about before the activation of insurance would be considered.

Most insurance companies underwrite professional liability insurance policies. There are some insurance companies that specialize in professional liability insurance and nothing else.

The cost of liability insurance varies between companies. The cost of the insurance depends on the business being insured and the level of service provided. The premiums also depend on the revenue of the company number of employees, location of the business, the limitations and deductibles chosen and the risk factors of the business. The cost of liability insurance is deductible as a business expense which will help minimize the cost of the insurance.

The number of years the business has been in business will be taken into consideration when calculating premiums. Those who have been in business for three years or less are considered a new business and are classified as a high risk business due to the limited experience. Once the business gets beyond the 3 year mark, they are considered a business with some experience. The types of clients the business does business with will have a bearing on the premiums. If clients have a lot to lose, such as financial oriented clients, there is more on the line if they decide your business cost them money. The services your business provides will also determine the premiums you pay.

The cost of liability insurance can be minimized by paying attention to what you are buying. Do not buy a one plan fits all type of plan. It will contain elements that are not practical for your business.