What Is Professional Liability Insurance? Costs and Coverage

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    What Is Professional Liability Insurance?

    Professionals like accountants, attorneys, and doctors are covered by professional liability insurance (PLI) to guard against malpractice and other claims brought by their patients. Due to the fact that general liability insurance policies do not provide coverage for claims resulting from carelessness, malpractice, mistakes, or misrepresentation, professionals with specialized knowledge must get this kind of insurance.


    • Businesses are shielded from malpractice lawsuits by professional liability insurance.
    • This insurance is used by experts including accountants, architects, information technology specialists, doctors, and other professionals who charge clients for their services.
    • PLI typically costs $500 to $1,000 each year, which is far less than hiring a lawyer, paying court charges, and other related costs.

    How Professional Liability Insurance Works

    Professional liability insurance may go by several titles, such as medical malpractice insurance for those in the medical field or errors and omissions insurance for real estate agents, depending on the occupation. Professional liability insurance is a specialist policy that isn't covered by business owners' policies, in-home business policies, or homeowners' endorsements.

    Most professional liability insurance policies are claims-made, meaning that coverage is only valid for actions taken and events taking place while the policy is in effect. There are event policies as well, which provide coverage for incidents that happened while you had coverage—even if you let your insurance lapse and a client makes a claim against you after it did. Nevertheless, incidence policies are uncommon.

    Most professional liability insurance policies will defend the insured against losses resulting from any claims made during the policy period due to any covered mistake, oversight, or carelessness in the course of the insured's professional activities during the policy period.

    What Is Included in Professional Liability Insurance?

    Only those legal liabilities specified in the policy are covered; neither criminal prosecution nor all civil legal obligation is covered.

    Examples of liabilities not covered by PLI are:

    • Employee injuries
    • Employee discrimination lawsuits
    • Vehicle business use
    • Bodily injury
    • Business property damage
    • Customer injuries or damages
    Core insurance may not cover situations like cyber liability, data breaches, and other tech-related problems. A second policy is offered, nevertheless, that addresses data security and other security-related technological challenges.

    Examples of liabilities covered by PLI are:

    • Mistakes, errors, and oversights in services provided
    • Undelivered services
    • Missed deadlines
    • Negligence or failure to meet standards
    • Breach of contract

    Professional Liability Policy Wording

    Different service providers typically use different language in their professional liability plans. Some may be expressed in ways that make them simpler to compare, while others may differ to the point where what seems to be the same coverage isn't.

    Wording with major legal differences can seem confusingly similar to non-lawyers. Think about these two examples:

    • Negligent act, error or omission
    • Negligent act, negligent error, or negligent omission

    The policyholder is protected by coverage for "negligent act, error, or omission" from loss or circumstances that arise only as a result of any professional error or omission or a negligent act. Because of the phrasing, a careless mistake or omission would not be covered.

    Different rules apply to the "negligent act, negligent error, or negligent omission" clause than to the prior one. It must be established that an error or omission was caused by negligence rather than being merely an error or omission for it to be covered. The clause may have to say "negligent acts, negligent errors, negligent omissions, errors, or omissions" if you intended to include all five categories of incidents.

    Tip : You should consult a lawyer experienced in professional liability insurance before buying a coverage. You don't want to get coverage only to discover that an incident isn't covered because the provider's wording forbids it.

    How Much Does Professional Liability Insurance Cost?

    Your practice region, the industry you work in, and the quantity of claims you have faced will all affect how much you pay for this insurance. The number of employees you have and the duration of your business could also have an impact on the cost of your insurance.

    Like other insurance types, coverage limits and deductibles have an impact on your costs. The average cost of professional liability insurance is $59 per month, with most policies costing between $500 and $1,000 annually, according to insurance company Insureon.

    Who Needs Professional Liability Insurance?

    If you work for a business that provides services, the business ought to carry PLI, and the policy ought to cover your services. However, you should think about getting this kind of insurance if you own a small business and offer professional services or hire out your services to other companies. These are a few instances of professionals who require this insurance:

    • Consultants
    • Engineers
    • Insurance agents
    • Real estate agents
    • Brokers
    • Architects
    • Accountants
    • Financial advisors

    Who Should Get a Professional Liability Insurance Policy?

    Professionals and companies that offer services to clients ought to purchase professional liability insurance. These policies cover allegations that you or your business committed professional blunders, errors in judgment, or rendered subpar services.

    What Are the Two Basic Types of Professional Liablity Policies?

    Both claims-made and occurrence professional liability insurance are available. When a claim is submitted, it must have been filed while the policy was still in effect. An incident that occurred while the policy was in effect qualifies as a "occurrence" and is covered by the policy.

    What Is the Difference Between Personal and Professional Liability Insurance?

    Damages or injuries to third parties on your private property are covered by personal liability insurance. If you offer professional services for a living, you may face claims of professional negligence, errors, omissions, or other problems. Professional liability insurance protects you in these situations.

    The Bottom Line

    Professional liability insurance provides defense against errors of judgment for small company professionals like physicians, attorneys, accountants, and architects. Regardless of how cautious or skilled a professional is, mistakes do occur, therefore this coverage is crucial.

    PLI is more affordable than paying for legal counsel, court fees, and other related charges, which range from $500 to $1,000 annually. If you own a small business, you should see an insurance agent to establish whether you require protection and how much you should purchase.

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