Professional liability insurance coverage protects you against client losses. This post covers everything you need to know before signing up for a policy.
Also known as errors and omissions coverage or E&O, professional liability insurance companies protect your business if negligence occurred while providing services.
Why would you need professional liability insurance? Let's say you give financial advice to a client, but it results in losses.
This could be entirely outside your control; maybe the market declined, or the government introduced a new policy. Your client won't understand this and will end up suing you for damages.
With E&O insurance, you won't have to worry about the settlement or court costs. Your carrier takes care of everything.
Even the most professional and experienced individuals make errors—we're all human, after all. However, clients typically don't understand this or accept it as an excuse if your mistake costs them thousands of dollars.
This is where professional liability insurance can help. It protects you if you make a mistake that results in client losses.
But how much professional liability insurance coverage do you need?
We’ll cover everything you need to know about professional liability insurance, including how it works, what it covers, and how much you realistically require.
To get professional liability insurance, ask your existing insurance provider if you can add E&O to your policy. If your carrier doesn't do professional liability insurance or you currently don't have a carrier, head over to Worth Insurance to request a quote. This only takes a few minutes.
After receiving a few quotes, try to find the policy with the cheapest professional liability insurance fees and the highest limits. It's also essential to look out for a carrier's insurance rating since it shows you how financially stable they are.
Once you're covered, continue providing financial services with peace of mind knowing that your insurance will take care of potential client losses.
Here are the most significant liabilities that E&O covers:
Your company's largest potential expense during a lawsuit is settlement costs. These costs can range anywhere from a few thousand dollars to hundreds of millions of dollars, depending on the size of your financial firm.
Fortunately, most professional liability policies cover the total settlement amount, so you won't have to pay anything.
The second most costly expense is legal and court fees. Even in the best-case scenario where you weren't negligent and your former client has no legal grounds, you'll still need lawyers, investigators, and other professionals to clear your name.
But what makes professional liability insurance unique is that they don't only pay your legal fees—they'll hire the best public relations professionals to uphold your reputation.
The more employees working at your firm, the higher the possibility of mistakes. For example, if a scammer sends a high-ranking employee a link that exposes sensitive client information, your firm will be held responsible if you don't have professional liability insurance.
Professional liability insurance doesn't cover:
This is why it's still important to have general liability insurance since E&O insurance isn't a replacement.
The average professional liability insurance coverage limits range from $500,000 to $1 million. But because each business is unique, it's critical to sit down with your carrier and discuss your needs and how they can personalize a plan for you.
This amount is fine for small to medium-sized financial firms offering advice to everyday people. But if you're handling pensions worth hundreds of millions, these types of E&O plans won't help.
You'll have to partner with a custom E&O provider. Fortunately, finding the perfect carrier is easy with Worth Insurance, regardless of your business size or needs.
The most recent and mainstream example of professional liability insurance occurred in 2019, when Princeton University sued Tod Williams Billie Tsien Architects and their subcontractors Jacobs Entities for missing their project deadline by 10 months.
The long legal battle cost both parties millions, and an undisclosed settlement amount was agreed upon.
Another example occurred in 2018, when an error in the banking software of Wells Fargo denied multiple mortgage modifications to qualified customers, leading to hundreds of mistaken foreclosures.
After a few months, Wells Fargo admitted fault and had to pay $8 million to compensate for losses experienced by affected customers.
Professional liability insurance coverage is essential for every business, from large financial institutions to consultants and small corner stores. This is because it settles all client losses and gives you the freedom to operate without worrying about potential lawsuits.
So if you're shopping for professional liability insurance coverage but don't know where to start, consider Worth Insurance: We provide the best insurance quotes within minutes. Request a free quote today.