Professional liability insurance is also known as the errors and omissions or malpractice insurance. Professional liability insurance consultants sell their insurance policies to engineers, doctor, real estate brokers, accountants, and other licensed professionals. Such professionals require addressing business liability risks that arise in the course of rendering the services.
How Real Is The Risk?
Most of the times, the licensed professionals will downplay the risks associated with the jobs. However, professional liability insurance consultants offer a word of caution to such people. If any business project goes awry, consultants without malpractice insurance risk going to court and pay for the losses incurred.
For instance, a software developer may think his software will not fail. Sadly, the system fails, and the client decides to sue. Besides losing a client, be prepared for court battles and legal fees. Here are a few realities:
- The tech business
Technology has its fair share of challenges, and the industry is highly susceptible. Also, there are no clear standards and laws that govern the industry. Sometimes, there are no clear rules on what is acceptable to the client. There are few legal precedents in the tech industry
- Be wary of dishonest and dissatisfied clients
Sometimes, a dishonest or dissatisfied client could cost you time in endless court cases or loss of money in legal suits. Sometimes, the client will allow negotiating with you and others may decide to sue.
Benefits of Professional Liability Insurance
The general liability insurance covers not all claims. Claims such as inaccurate advice, negligence, and misinterpretation fall under the professional liability insurance policy. Protect your business from such risks.
The error and Omission insurance pays the cost of the judgment against the accused and the cost of legal defense up to a certain limit.
What does it cover?
There are two types of policies:
- Occurrence-It covers any claims that took place within a certain coverage period. It applies even after the policy lapse, for instance, if you retire or change careers.
- Claims made– The policy has to be in effect when the event takes places, and a lawsuit is filed.
However, it does not cover: Financial loss due to dishonest or fraudulent activities
How much is the premium and how is it calculated?
Several factors determine the premium such as the size of the firm, the clients and services offered deductibles and limits chosen. A firm with 15-20 employees would pay about 1.5-2.5 percent of the gross fees as long as they have a good history loss record.