FAQ about Professional Liability Insurance

Why Hasn't My Agent Told Me about Professional Liability Insurance?

There are many reasons why an agent may not discuss Professional Liability Insurance with a client. Perhaps the agent feels the client does not need the coverage. Maybe the insurance agent is unfamiliar with the details of Professional Liability Insurance. Or it could just be that the client has never asked. If you are concerned about your exposure to Professional Liability risks, be sure to bring this up in your next conversation with your agent. If he or she is unable to answer your questions, you may want to be referred to a specialist or find one on your own.

Do I Need Professional Liability Insurance?

Whether a specific business requires Professional Liability Insurance is based on a large number of factors. However, if your business does work for clients for a fee and you have the potential exposure to being sued for work that is done poorly, or mishandled, you may need some kind of Professional Liability Insurance. Other professions may be required to have the coverage by law or regulations. A trade association may be able to help you determine if most people in your line of work carry this type of coverage.

Is Professional Liability Insurance Expensive?

In general, Professional Liability Insurance is not very expensive compared to other kinds of insurance coverages (with some exceptions, such as renters insurance). Still, coverage for certain professions can be quite costly, depending on their potential exposure to lawsuits and claims. The most expensive type of Professional Liability Insurance is Medical Malpractice Insurance, which can run in the tens of thousands of dollars a year. However, many other professions may find adequate coverage for $1500 a year. The cost will be very much based on what type of business is being insured and its claims history.

How Does Professional Liability Insurance Work?

Professional Liability Insurance provides defense costs and pays settlements and judgments due to suits arising from work done on behalf of a client. The insurance is triggered when a suit or claim is brought against a professional by a client. This insurance covers liabilities and claims that are usually not covered by other types of business insurance.

What Does a Professional Liability Insurance Policy Typically Cover?

There are a number of different types of Professional Liability Insurance, but in general it covers the costs of settlements, judgments, or claims brought by clients against the insured business due to work done that was mishandled in some way that caused the client financial harm. The insurance policy also pays the costs of providing a defense against this type of lawsuit, up to the policy limit. In most locales, the cost of punitive damages is usually not covered by insurance by law.

How Is Professional Liability Insurance Different from General Liability Insurance?

Professional Liability Insurance covers claims due to financial harm done to a client through mishandled work done on behalf of that client. General Liability Insurance covers property damage, bodily injury, personal injury, and advertising injury done to anyone, not just a client, but does not usually pay for financial damages due to problems with work done by the insured business.

How Do I Determine How Much Professional Liability Insurance I Need?

An insurance agent will be the best help in assessing the proper amount of insurance, but in most cases this will be based on the business exposure to lawsuits for covered risks. In many cases, the revenue of the business will be a good guideline in helping determine how much coverage to buy.

What Is the Minimum for Professional Liability Insurance?

The size of Professional Liability Insurance policies vary depending on the occupation of the insured business, but in most cases the smallest policy will be about $1 million of coverage, per year, costing between $1000 and $1500. Businesses requiring less coverage may not find a lot of policy options.

Does Professional Liability Insurance Have to Be with the Same Company as My Other Insurance?

No, a professional may get a separate Professional Liability Insurance policy from another insurance carrier. However, he or she may find that there are discounts for having multiple policies with the same insurance company or that they can get some Professional Liability Insurance through a rider or endorsement to their current General Liability Insurance policy.

What Questions Will My Agent Ask Me When I Call?

An insurance agent will need to know a lot about the business to be insured to help a customer find the best Professional Insurance Liability policy. The agent will want to know the nature of the business; annual revenues; whether clients sign a contract and to see that contract; what training employees get, if applicable; and information about any quality controls the business has in place. The agent will also need to know about past claims, if there are any. Overall, the agent is going to look at the whole business to assess the exposure to Professional Liability to find the best insurance policy.

What Does the Rating System Mean and How Can I Find Out How My Insurance Company Is Rated?

All insurance companies are rated by firms that specialize in assessing the financial strength of these types of companies. A.M.Best is one of the best-known companies for insurance company ratings, but others include Moody's Investors Services, Standard & Poor's, and Fitch. Each firm has a system for grading. In general, higher rated companies are more stable and more likely to pay claims, so it is important for a buyer of insurance products to be comfortable with the rating of any insurer they are doing business with. A.M. Best assigns letter grades to insurers, with A++ being the highest. Any insurance company with a rating less than B is considered fair, and those with lower grades are potentially in financial trouble. Ratings can be found on A.M. Bests Web site, and many insurers freely advertise their ratings in their own documentation.

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