What Is Professional Liability Insurance?
Professional liability insurance helps cover you and your company if you make a mistake in the professional services given to a customer or client. This coverage is also known as errors and omissions insurance (E&O). Even if you’re an expert in your business, mistakes happen. And if your client or customer thinks a mistake in your professional services caused a financial loss, they can sue you.
Professional liability insurance for small businesses helps cover claims of:
Negligence
Misrepresentation
Inaccurate advice
Personal injury, like libel or slander
Even if you didn’t do anything wrong, your client can still sue your business if they believe you’ve made a mistake. Without coverage, you’ll have to pay expensive legal defense costs out of pocket.
Many insurance companies write a professional liability insurance policy on a claims-made basis with a retroactive date and extended reporting period.
The retroactive date means you’re covered for incidents that happen on or after a specified date in your policy.
The extended reporting period helps cover claims filed within a certain time after your policy expires. This is generally a 30- to 60-day period, but you can extend this period to a year or more for an additional cost.
Your insurance company only covers claims against your business during your policy period within the extended reporting period. And the claim must be from a covered error or omission that happened after your policy’s retroactive date. It can help cover:
Damages
Legal defense costs
Disciplinary proceedings
Loss of earnings
Subpoena assistance
Some policies can also be written on an occurrence policy. This means there will be coverage for losses that happen during your policy period, even if the claim gets reported after your policy expires.