Regardless of the size of your business, odds are you’ll run into some sort of disagreement with one or more clients at some point. Some of such clients may even decide to sue your company to court.
When such incident happens, you may have to spend a lot to cover for legal expenses and depending on the type of lawsuit, the expenses may affect your business financially.
A professional liability insurance covers business owners when their expertise, skills or ability to perform a specific type of job or render a precise service is questioned.
This often occurs when a customer or a client sues them a result of their inability to match an expected professional standard, when they make severe mistakes or unable to render a promised service, a professional liability insurance can protect such a business against legal costs.
While that definition may seem a bit long and windy, understanding the different situations where a professional liability insurance is applicable will make it easier for you to understand what the insurance policy entails.
Situations Where Professional Liability Insurance Is Applicable
A professional liability insurance is suitable in the following situations:
Professional liability insurance protects against lawsuits as a result or work mistakes.
Sometimes, work mistakes happen – especially when you’re a professional like a real estate agent, an electrician, an architect or medical service provider like an optician or dentist, our mistakes can cause severe problems for clients.
This is one of the key reasons why many experts need professional liability insurance.
The policy covers you and your employees when a client or customer sues your business for failure to deliver top quality service as agreed or for making costly mistakes.
Whatever lawsuit you’ll have to deal with could also be an indication of your client’s or customer’s attitude and not the quality of work you delivered.
For instance, if you’re a social media marketing expert and a client hired you for a campaign, you did the job professionally as required but our clients have unrealistic ideas about the job which leave them disappointed and they decide to sue you.
Your professional liability insurance will protect you by covering your legal costs even if the lawsuit is eventually nullified in court.
This indicate that a professional liability insurance can protect you when your business delivered substandard services and when your business is not at fault at all. So regardless of the reason behind the lawsuit, a professional liability insurance.
Professional liability insurance is considered a necessity for professionals like medical doctors, accountants, therapists, and creative etc.
In any case, these professions requires some in-depth level of education or professional training and they are monitored by some form of legal guidelines.
Nonetheless, many small businesses are expected to adhere to some form of professional standards for their customers and clients. Such is usually required because even a usual mistake can cause financial loss and trigger a lawsuit.
Misinformation you’re a digital marketing expert and your clients get an unlikely expectation about the outcome of your work because they don’t understand digital marketing terms.
Missed Schedules: for instance if you’re a consultant and your client often missed the agreed schedules to send you required information or material to do their job, the can still sue you for failure to do their jobs on time.
Paperwork: for instance you’re ready to deliver a presentation, however, your secretary forgets to add a very key documents to the ones submitted to the clients which makes client to violate a legal regulations in the long run.
The list is almost endless – in fact, any sort of common mistakes can end up as a lawsuit in a courtroom.
Professional Liability Insurance protects you against legal costs
Lawsuits are never cheap and having a professional liability insurance protects your business from the financial stress of a lawsuit.
A professional liability insurance can protect your business against the following service-related liabilities:
This include the costs of shipping an item involved in the case, the cost of processing paperwork, the cost of obtaining software licenses, make photocopies etc. All these costs add up to make your legal bills more expensive.
Court expenses include all the fees you have to pay for transcript and filing.
This refers to the lump sum you’re required to pay to evade future legal expenses as well as the expenses of hiring a mediator if you decide to use one.
This often cost within $150 and $400 for every work hour a lawyer works on our case.
Professional witness fees
This fee can include expenses such as the cost of documents, travel, hotels and meals.
If you lose the case and the court orders you to compensate the client or customer, whatever amount you’re required to pay is the court judgment.
In summary, a professional liability insurance can cover the cost of paying for a lawyer as well as other expenses involved in the lawsuit.
The benefits of a professional liability insurance are time related. This is because the policy is a claim-made coverage.
What does this imply? It simply means that to get the benefits tied to this policy, you must have it already when:
The incident that led to the lawsuit occurred
The lawsuit against your company was initiated
The insurance policy is mostly dependable and effective when it is active continuously.
This is one of the key reasons why many companies buy the policy as soon as they start their business and keep the policy for as long as they are still in business.