Opening a small business requires protection. Professional liability insurance (also called errors and omissions insurance in the industry) offers financial coverage to businesses in the event they’re sued for negligence or for failing to deliver their professional services. Errors and omissions insurance is vital for any business to have, regardless of industry, since a business can be sued even if it hasn’t made a mistake.
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Investing in Your Company’s Protection
The first question small business owners ask about professional liability insurance is: “What does this insurance type cover, and is it worth getting?” The answer is easy: This insurance type protects service providers who specialize in offering professional guidance or service from paying for all of the litigation costs if a client should file a civil lawsuit for negligence, so yes—it’s very much worth investing in.
Carrying professional liability insurance can save your company from financial ruin. Are you starting a law firm, accounting firm or consulting firm? Offering professional services to the public can be tough, especially if the advice one of your employees gave to a client isn’t followed through, was misunderstood, or was incorrect. If a client loses a case or their own financial security having followed your advice, there’s a possibility they’ll come after you for restitution. Having worked with the public for a number of years, you know that there are customers out there who are never satisfied with the good work they are provided with. Though we’re taught that the “customer is always right,” that’s really not true. To avoid a financial plummet and a poor business reputation, have your professional liability insurance to help protect your business.
Professional Protection: Reading the Fine Print
Unlike other insurance policies written with the same basic formula, the Small Business Chronicle (Chron) reports that the professional liability insurance package does not have a standard written policy. This means the language changes based on the needs of the holder of the policy. Not every kind of consulting business is protected under professional liability insurance. So before you invest in a plan, make sure it will have your back should an unsatisfied customer threaten to sue.
Also unlike other insurance packages, premium rates vary on factors that you can’t control. Chron shares that these factors include state laws, your business’s financial standing, how long you have been in business and the number of claims that have been filed in your industry. For example, if you’re in an industry that has recently taken a financial hit, your premiums will rise. To keep premium raises from happening, protect your employees by conducting background tests and offering safety training and highly-rated equipment. This will help prove to your insurance provider that you are an individual of integrity, and as such will conduct all of your business dealings with the same amount of honor.