Examples of instances covered by professional liability insurance are:
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Mistakes, errors, and oversights made while providing services
Instances where services promised are not delivered
Missing deadlines or failing to meet agreed-upon standards
Negligent actions or failure to meet professional standards
Breaches of contract or agreements
However, so many misconceptions surround this insurance that not investing in it can leave professionals vulnerable to significant financial and reputational damage. Here, we will bust the top three misconceptions surrounding professional liability insurance.
It’s a common misconception that only large corporations or firms need professional liability insurance. This misconception is based on the reasoning that small businesses do not have exposure to significant risk. But this is not the case.
The truth is that professionals across various industries, irrespective of the size of their businesses, can benefit from this insurance coverage. Professionals, whether operating as small business owners, freelancers, or even consultants, may face severe financial consequences if a lawsuit is filed against them, as their financial resources are limited.
Whether it’s a miscommunication with a client or an unintentional error in the services rendered, a lawsuit’s financial repercussions can be devastating. Professional liability insurance provides these professionals with a safety net. It can protect both their assets and reputation in the event of any such claim.
General liability insurance is essential for businesses. It protects against damage to property, against bodily injury, etc. However, general liability insurance does not cover professional mistakes or judgment errors. There are significant coverage gaps. There are significant coverage gaps.
This is where professional liability insurance saves the day. It specifically covers claims related to errors or omissions in the services provided, professional negligence, etc. For professionals like accountants, lawyers, physicians, architects, etc., whose work needs specialised knowledge and expertise, professional liability insurance coverage is a must. Without it, they could face substantial legal costs and damages that general liability insurance would not cover.
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Some people believe that they don’t need professional liability insurance because they are never negligent. Those with a strong record of professional success especially believe this.
The truth is mistakes can happen even to the most notable experts in their field. Even with the best of service, some clients may be dissatisfied. Such clients can file complaints to recover their losses. Professional liability coverage can provide protection in such scenarios, whether the complaint is genuine or frivolous. It covers costs incurred for legal defence, settlements, etc., ensuring that professionals can focus on their work without the constant fear of litigation hanging over their heads.
The following are the key benefits of a professional liability insurance policy:
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Protects from frivolous lawsuits – Even if you have provided the best service, a frivolous lawsuit can cost you significantly. Professional liability coverage offers adequate protection in such scenarios.
Paying for damages – Errors can happen from the best of experts. A lawsuit can cost you significantly if the court awards damages to the other party. Professional liability coverage is an important safeguard in such situations.
Risk management – In the long run, by paying a small premium for this policy, you can protect yourself from paying a much larger amount in the future.
Professional liability insurance safeguards professionals from claims made by their clients due to negligence or other errors. Several misconceptions surround this category of insurance. However, from large corporations to freelancers, professional liability insurance offers coverage against potential lawsuits. Some may argue that the coverage provided by general liability insurance is sufficient. While general liability insurance is important, it does not provide coverage against professional errors or negligence. Professional liability insurance covers this gap.