Doctors, attorneys, engineers and other professionals each have something in common: they all need insurance coverage including errors and omissions liability. Also known as professional liability insurance, this type of insurance coverage protects policy holders individually as well as corporately from clients holding you responsible for services you provided or failed to provide that did not meet expectations.
Errors and omissions insurance can go by different names. For medical professionals it is known as malpractice insurance. For mostly everyone else it is known as professional liability insurance. The name is not important, but what is covered is.
Most states require professionals to carry liability insurance, spelling out minimum coverage for insurance or indemnity against injury or death per person, per occurrence plus an aggregate total. Professionals that do not maintain minimum liability insurance may find that their right to practice in a given state is subject to revocation.
What is Covered
Professional liability insurance provides coverage against judgments, settlements and related legal costs. Should the lawsuit prove without merit, a legal defense must be mounted, costing perhaps tens of thousands of dollars to successfully defend.
Without sufficient liability coverage, individuals and small businesses can be made bankrupt. Even the largest corporations can find their profits hammered if they lose the suit.
Protecting Against Mistakes
“Everyone makes mistakes” notes the Insurance Journal. An in-house risk management program can limit errors, but it is impossible to eliminate mistakes entirely.
Losses can go beyond mere cost and include damages and other claims filed to cover expenses and potential costs well beyond the basics. For instance, if your company produces widgets and sends these items to the wrong address, it could delay the recipient’s production of the finish product, putting it at a competitive disadvantage. A lawsuit could be filed to recoup not just the loss of time getting the product delivered, but the loss of business incurred from the delay.
Finding the Right Coverage
Professional liability insurance is available from many insurance companies, but there is no one-size-fits-all coverage. Instead, the professional and his company should assess risk and exposure before shopping for insurance. Deal with an insurer that has a strong track record of providing professional liability coverage for their clients.
Your insurer should match your insurance coverage with businesses similar to your own and in fields that you serve. Look for insurer with a top rating from A.M. Best or other insurance rating firm.
The time to buy errors and omissions insurance is before you run into trouble. Professional liability insurance is just as important as your other commercial insurance needs including property, general liability and product liability. You may be able to save money by purchasing coverage from one insurer too, so shop around to find the best overall deal to serve your current and future needs.
Insurance Journal: The Ins and Outs of Errors and Omissions Insurance — http://www.insurancejournal.com/magazines/features/2004/07/19/44745.htm
SBA: Types of Business Insurance — http://www.sba.gov/content/types-business-insurance
Luca Richardson is a business financial expert. She frequently shares her tips about risk and reward on insurance blogs online. Click here to learn more about Lloyds.