Providing advice to sometimes difficult clients is no cakewalk. Everyone makes mistakes and errors can slip through the cracks. From accountants to real estate brokers to consultants, professional liability insurance is a necessary expense for many professions and businesses.
Professional liability insurance, often referred to as E&O or errors and omissions, is a type of liability insurance that protects professions against hefty civil lawsuits based on an error or negligence. This can include straightforward negligence, a client’s hefty financial losses, breach of contract, and other errors depending on the industry. For professions in the medical and legal fields, professional liability insurance isn’t just a safeguard, it may be legally required depending on the state.
For instance, an overworked accountant finally finished all the tax documents for a local business. However, the accountant made an error with the business’s tax code and now they’re in hot water. Professional liability insurance can help the accountant and their business with funds for the lawsuit and may help with the often significant damages in civil court. In other words, professional liability insurance is the saving grace of businesses everywhere.
There are two main types of professional liability insurance, occurrence, and claims-made. With claims-made insurance, the insurance company will only pay out claims if the policy was active when the event occurred. Occurrence insurance, on the other hand, can be used for events that happened prior to being insured. It isn’t uncommon for professionals who are retiring to get occurrence insurance to cover them during the time they were working.
Professional liability insurance isn’t a cure-all, however. It usually does not provide coverage to claims under worker’s compensation, deliberate wrongdoing, or illegal actions.
Professional liability insurance is a heaven sent for professions in the medical and legal field as well as a litany of other fields. For businesses and individuals alike, this insurance can protect the company from financial ruin because of one mistake. After all, we’re all just human.