Professional Liability

The Basics of Professional Liability Insurance
Professional liability insurance (PLI), also called errors & omissions (E&O) coverage, is designed for professionals who need protection against the legal consequences of their errors. Individuals and businesses are prone to making mistakes when providing professional services or giving advice. They are covered for the costs of potential lawsuits, so there is no requirement to pay thousands of dollars out of pocket.

Certain types of professional practices are required to carry this type of insurance. Some clients require their professionals to be covered. However, not every type of professional needs this type of protection. The most common policyholders are doctors, lawyers, architects, engineers, accountants, software developers, consultants, brokers, etc. They are at the greatest risk of causing the most harm to their clients compared to teachers or housekeepers.

A PLI policy does not cover defamation of character, breach of contract, personal injury or breach of warranty. Unlike general liability insurance, it does not cover bodily injuries and property damages. This policy is not similar to worker’s compensation insurance that covers the damages caused to injured workers.

Types of Coverage

There are different types of professional liability insurance known under various names, such as medical or legal malpractice. This type of insurance is made on a claims-made or occurrence basis. The average policy is claims made, so the policy must be active when the claim is made. An occurrence-based policy is a preferred choice when the policyholder needs to change careers.

How It Works

When buying PLI coverage, there are certain factors to consider: premiums, policy periods, policy limits, deductibles and exclusions. The premium is the cost that must be paid monthly to sustain coverage. The policy period is the length of time that the policy lasts before it expires. The deductible is the amount that must be paid out of pocket. The policy limit is the maximum amount of funding that the policyholder can receive for a claim. The exclusions are the terms that are not covered by the policy. The total amount of coverage that a policyholder needs depends on the extent of risks and the value of the business.