Does Your Client Need Professional Liability Insurance?


Does Your Client Need Professional Liability Insurance?

By: Adam M. Matheny

What Is Professional Liability Insurance?

Is your client in the business of providing some form of professional advice or services to individuals or businesses? Could the services they offer, including counseling, cause the person or firm to lose money or something else for which they could be held responsible?  If they are, then they are among the many millions who need professional liability insurance.

The insurance provider may also call this type of insurance, “errors and omissions” or E&O insurance. Typically, this type of insurance covers some things not covered under the general insurance policy. This might include misrepresentation, negligence, inaccurate advice, or a violation of good faith and fair dealing.

Who Needs Professional Liability Insurance?

Depending on where they live, your client may be required to purchase professional liability insurance, in particular for doctors and attorneys. Both medical malpractice and legal malpractice insurance are forms of professional liability insurance. Among other professionals who might need this type of insurance are:

·         Accountants

·         Architects

·         Engineers

·         Graphic designers

·         Information technology (IT) consultants

·         Insurance professionals

·         Investment advisors

·         Management consultants

·         Real estate agents and brokers

·         Software developers


This is only a small sample of the many professions in which professional liability insurance is highly recommended.

Types Of Professional Liability Insurance

There are two main types of professional liability insurance available, claims-made and occurrence.

  • Claims-Made – This type of insurance is the most common form and is designed to cover claims made during the time the policy was in effect. The event must also have occurred during the time the policy was in effect.
  • Occurrence – This type of insurance is designed to cover things that happen before you retire or make a career change. It will cover any event that occurred during the time the policy was in effect, even if that insurance has since been allowed to expire.

What Does Professional Liability Insurance Cover?

When your client has a professional liability insurance policy, it should cover things like the cost of hiring an attorney to defend them in the event they are taken to court. It will also cover any judgments against them up to the maximum amount of coverage stated in the policy.

However, in most cases, professional liability insurance does not typically cover things like dishonesty or intentional acts that result in a loss. The right type of policy may also cover things like any penalties assessed by professional licensing boards. Like most forms of insurance, there is typically a deductible your insured will be responsible for which could range from $5,000 to $25,000 or more.

How Much Coverage Does My Client Need?

How much professional liability insurance your client needs will depend on the size of their business and the level of risk it involves. As an insurance professional, it is your responsibility to help your client calculate the correct amount of coverage needed. If you are unsure, contact your carrier directly for assistance.

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