What is Professional Liability Insurance?

professional liability insuranceThings can and do go wrong in business. People make mistakes, and when they do, their company needs to be safeguarded against the issues that arise as a result. Professional liability insurance is there to help compensate businesses when problems occur, saving them from potentially having to pay out millions.

As an example, an accountant firm may have an employee who commits what is often referred to as a ‘wrongful act’ when looking after a client’s finances or paperwork. This in turn means that the client decides to cancel their account, and in a worst case scenario, they also decide to sue for damages. It is at this point that having liability insurance would pay off. The provider would pay out to the company to reimburse the legal costs and fees, up to whatever the agreed amount is. It’s important to remember that it’s not just the damages that cost money – legal fees can be crippling too.

In reality, there are few if any industries that are not involved in some kind of liability insurance – you can see a list of different types here. Businesses by their very nature will be negatively impacted when they cannot fulfil an order, or when they make a significant mistake that causes damages to a client. We’d all like to work in a business in which nobody makes silly mistakes, but this simply never happens, which is why liability insurance is so important. Even the smallest of corner shops might have liability insurance, just in case one of their fixtures or fittings harms a customer – it’s a natural part of most business plans and can affect personal finances.

If you feel as though the product you offer, whether it’s a physical object, or a service, could have a significant negative effect on a customer or even member of the public if it’s used improperly by an employee, then you need liability insurance. It’s generally not that expensive if you’re not in a risky industry, and the outlay certainly is better than taking the risk.

Finding it isn’t too tricky, but you do need to identify your needs before you make the decision. For this, it’s usually best to speak to an independent adviser – this way you know you’ll be getting impartial advice, rather than allowing an insurer to simply sell you their products. Have a chat with them, establish your needs, and you’ll be able to go about your business without having to worry.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

Speak Your Mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.