No matter how good you are in your profession, mistakes are sometimes inevitable. If a client or customer thinks that your mistake led to them incurring a financial loss, they might decide to sue you. Professional liability insurance covers you or your company in the case of a professional mistake.
In some states, professional liability insurance is mandatory for all businesses. Even in states where it’s not a requirement, professionals still choose to get it in case they get sued.
It is imperative to get this insurance policy if:
• You render your professional services to clients directly
• You advise your clients frequently
• You are required to sign a contract that makes you carry coverage
Usually, the policy helps cover claims of inaccurate advice, professional negligence, and misrepresentation. However, it doesn’t cover everything. Some exclusions include work-related injuries, data breaches, and intentional wrongdoing.
An errors and omissions insurance typically covers both the court costs and settlements up to the amount dictated by the insurance contract. In most cases, insurance companies write the policy on a claims-made basis with a retroactive date and an extended reporting period.
The retroactive date means that you or your company is covered for any incidents that take place on or after a specified date. On the other hand, the extended reporting period helps protect incidents that happen within a particular period after your policy lapses. Although the period usually ranges between 30 and 60 days, you can part with some extra money to extend this period to a year or more.
While the claim-made policy is the most common, there is also a type of professional liability insurance, known as occurrence. An occurrence policy will cover a claim for an incident that took place during the period of coverage. This policy comes in handy if you change careers or retire.
No matter how much you try to satisfy your customers, some might sue you for no apparent reason. These frivolous lawsuits can cost your business so much money, but you don’t have to worry about that when you have insurance. The insurance policy also covers you when you are at fault.
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