Professional liability insurance is a type of business insurance required by most states that provides coverage for professionals and businesses to protect against claims of negligence from clients or customers. Professional liability insurance typically covers negligence, copyright infringement, personal injury, and more. Accidents are prone to happen, and you want to cover yourself if an accident is caused by your company. Here are some things you need to know so you can make better decisions about which professional liability insurance you need to protect your professional reputation, your work, and your customers.

2 Types Of Professional Liability Insurance Policies

There are two types of professional liability policies: claims-made and occurrence. Most professional liability insurance policies are claims-made, meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid.

  • Claims-made policy: A claims-made policy refers to an insurance policy that provides coverage when a claim is made against it, regardless of when the claim event occurred. A claims-made policy is a popular option for when there is a delay between when events occur and when claimants file claims. This type of policy is an insurance policy most commonly used to cover the risks associated with business operations. For example, these policies are often used to cover the potential for mistakes associated with errors and omissions (E&O) in financial statements. They are also used to cover businesses from claims made by employees, including wrongful termination, sexual harassment, and discrimination claims. Claimants may make claims against a policy months after the event the claim took place. This type of liability is referred to as employment practices liability and may also cover the actions of directors and officers of the business.
  • Occurrence Liability Policy: An occurrence policy provides coverage for incidents that happen during your policy period, regardless of when you file a claim. These policies can be more expensive than a claims-made policy because of how long coverage applies. Occurrence and claims-made insurance policies differ both in coverage and cost. For business owners, it’s important to understand the difference between occurrence and claims-made insurance before you purchase a policy. Discuss with your insurance provider what type of coverage might be best for you.

Factors That Contribute To The Cost Of Professional Liability Insurance

Insurance is no different from purchasing a pair of shoes. You can buy gym shoes, or you can buy Nike gym shoes. The price is often determined by the quality of materials. The same goes for professional liability insurance.

All of the following tie into the cost factor:

  • Type of Business. The industry your business is in and the type of work you do can impact your errors and omissions insurance cost.
  • Location
  • Coverage Limits
  • Deductible Amount
  • Number of Employees
  • Years in Business
  • Claims History

Professional Liability vs. General Liability Insurance

If I have one of these insurance policies, why would my business need the other? Every business owner should invest in general liability coverage to protect their personal investments. Accidents do happen, and when and if they do, it can mean costly lawsuits. A small business cannot afford the monetary loss associated with these claims. General liability insurance is needed for contractors and professional handyman services because it covers legal fees for any sort of settlement a company and its client might have in court. Professional liability insurance is what covers any sort of incident of negligence on the part of a professional contractor or handyman. In most instances, it won’t be a question of “general liability vs. professional liability” but rather, “do I need general liability AND professional liability?” Speak with an experienced agent about your business, and the services you provide, and they will help you gauge the coverage you may need.

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About Rollins Insurance 

Rollins Insurance is an independent insurance agency providing our clients the best prices with the most coverage possible since 2008. We represent multiple A-rated insurance companies to make sure we deliver the most competitive rate packages to our clients in Kentucky and Ohio. We find that most people are under-insured and over-paying when we meet them. We love what we do and our primary business is Personal Auto, Homeowners, and Life and Health insurance. We are a family-owned and managed business that specializes in providing needs-based insurance services.
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