Introduction to Professional Liability Insurance | Understand Its Types

We are living in an era of uncertainty. Let’s be honest here… Although we have more comforts than our ancestors, our lives have been equally affected due to the side effects of technology. In this situation, everyone wants security for themselves and their loved ones. So the need for insurance has increased. But before we know the benefits of liability insurance let’s discuss what professional liability insurance is!

What Is Professional Liability Insurance?

If a client suffers a financial loss, reputational damage, or any other kind of loss because of the company’s misrepresentation, negligence, inaccurate advice, or unfair dealing then the client can legally sue the company. In these circumstances, professional liability insurance incurs the company’s loss and protects it from losses. It is also called professional indemnity insurance or error and omission insurance.

The company is not always at fault for customer loss but in some conditions, if a customer suffers a loss the company will be held liable for it.

Types Of Professional Liability Insurance

1. Product liability insurance
2. Umbrella Insurance
3. Property damage
4. Homeowners Insurance
5. Employer liability
6. Directors and officers’ liability insurance
7. Business income insurance
8. Reputational harm
9. Personal injury
10. Third-party liability
11. Vehicle insurance
12. General liability insurance
13. Personal injury
14. Bodily injury

In the United States, professional liability insurance is not compulsory but at some instant law requires you to be insured to protect your business from huge losses.

Top Liability Insurers Of USA

What Expenses And Claims Are Covered By Professional Liability Insurance?

This type of insurance protects the business owners or service providers and covers their losses in case their clients sue them because of their negligence, or become the cause of personal injury or bodily injury, or it can be copywriting infringement.

These insurance covers are custom according to the type of business and services you provide to your clients. You can’t just take and use the insurance plan made for another business because even if the businesses are the same you have different financial positions. Therefore, your insurance plan will be tailor-made according to your requirements. Professional insurance also ensures your reputation.

But there are also some cases that professional liability doesn’t cover, for example:

• Employee-related incidents
• Cases of fraud by company
• Physical accidents occur at the site
• Damage to business property

Types Of Professional Liability Policies

Professional liability policies are basically of two types

1. Claims-made
2. Occurrence

Claims-made is the most used one. It indicates that policy must be activated at the time of occurrence of the incident as well as the time when the company was sued by the client. In other situations, the company can’t claim their insurance.

How Much Does Professional Liability Insurance Cost?

Professional liability insurance is different for everyone. It depends on the type of services your business is providing, your expenses, in addition to your profits and losses.

The estimated average cost for small businesses is given below.

Prime Candidates For Professional Liability Insurance

Professional liability insurance is a type of insurance made for people who earn money by providing services.

The following are the professions that need insurance:

1. Technology professionals
2. Healthcare professionals
3. Accountants
4. Engineers
5. Real estate agents and brokers
6. Architect
7. Consultants
8. Advertising agencies
9. Lawyers
10. Software developers
11. Physical therapists
12. Physicians
13. Brokers
14. Contractors
15. Insurance brokers
16. IT consultants

Professional Liability Insurance in New York

In New York, businesses are required to get insured but this isn’t the case for small businesses, they aren’t required by law to get professional liability insurance.

However small businesses need insurance to get licensed or sign a contract with the client.

Following are the cases that are covered under professional liability insurance in New York:

• Missed deadline that caused financial loss to the client
• The company is accused of negligence
• Improper advice
• Undelivered services
• Mistakes during work

In 2020, New York was one of the states of the US that earned the highest value of direct premiums in medical professional liability insurance. The total amount of direct earned premium was over 1.5 billion US dollars.

The highest value of direct earned premiums of professional medical liability insurance in different states of the US:

Nursing Professional Liability Insurance

Nursing or medical liability insurance is also called malpractice insurance. The starting cost of this insurance policy for LPNs, VPNs, and RNs starts at around $68 per year. But that’s not the final digit.

If you are a nurse your insurance policy will depend on different factors such as your education, your experience in this field, your time spent on the job, and in which state you live.

Two types of professional liability insurance policies are made for nurses the first one is occurrence while the second is claims-made.

Occurrence policies are used for long-tail events. The claims-made policy only incurs losses if the policy was activated during the period of a lawsuit and when the event happened.

Occurrence liability insurance is more reliable than claims-made as it gives you long-term peace of mind, but it is also costly as compared to claims-made insurance. But these policies are tough to find these days, unfortunately!

As the importance of liability insurance policies is increasing the business of insurers also increasing with the same ratio.

Berkshire Hathaway was the largest malpractice insurer of the year 2022 and had a 20% market share. It’s a big share we can say that Berkshire Hathaway was the leader of the market in the year 2022.

Nurse Practitioners’ Professional Liability Insurance

The duty of a nursing practitioner is comparatively heavy and you are more in touch with clients and employers, which means there are more chances of risks. Employers and patients can sue you and you can suffer from high losses therefore protection from losses is most needed.

The professional liability insurance policies for nurse practitioners are the following:

1. Workers compensation insurance
2. Malpractice insurance
3. Business owner’s insurance
4. Commercial auto insurance
5. General liability insurance
6. Cyber insurance

Malpractice is a type of risk that exists for all medical specialists. But the cost of this liability insurance is a bit different for all, either high or low depending on the type of services they provide to their patients. This variability can be also because of high and low-risk factors.

Conslusion

In the USA you don’t need to have insurance at the federal level. But there is a law that states… if your client wants insurance before signing a contract then you must have to have professional liability insurance.

But businesses need to have liability insurance it can protect businesses from big losses and going bankrupt.

Even if states don’t require it but the people or businesses providing services are rational decision makers then liability insurance is a lifetime investment. That provides you the long-term peace of mind.