The 6 Most Important Things for Professionals to Know About Professional Liability Insurance

Owning a business can leave your clients open to liabilities in many different ways, and their general liability and property coverages will help cover quite a few of those liabilities. However, there’s a very specific risk associated with the services or products that a business provides that is not covered by commercial general liability insurance. Instead, Professional Liability Insurance (PLI) is necessary to address this risk.

Your business owner clients might have a lot of questions around their need for such coverage, and what exactly they’ll be covered for with this insurance. To best support them and their business you’ll need to be prepared to answer those questions, so here’s a few frequently asked questions about Professional Liability Insurance.

  1. What is Professional Liability Insurance (PLI)? Professional Liability Insurance is a type of commercial insurance coverage that protects a business in the case of errors or faults in their products or services.
  2. Who needs Professional Liability Insurance? Any businesses who have a one-to-one type of business model, and those whose services are built on offering advice and recommendations especially benefit from this type of coverage. Fitness professionals, IT contractors, teachers and marketing professionals are all great candidates for PLI coverage.
  3. What does Professional Liability Insurance cover? PLI will cover the costs associated with a lawsuit in case of professional error, such as missed deadlines, malfunction of a product your client sells/produces, or miscommunication causing issues for a customer or client.  Make sure you are familiar with the PLI products you offer, as the limits, coverage types and exclusions can vary wildly from policy to policy.
  4. Is PLI required to have for a business? Also known as “Errors and Omissions Insurance” (E&O), some states do legally require this coverage for all businesses. Some larger clients in your customer’s line of work may also require a subcontractor to obtain it before they will sign a contract with that business.
  5. What can affect the cost of a customer’s PLI policy? The way your customer runs their business can directly affect the policy premium. Employee training programs, contract verbiage, and dispute resolution practices can all reduce your customer’s premium.
  6. Will PLI cover criminal liability? PLI will only cover civil suits. If a lawsuit becomes a trial with criminal proceedings, this insurance will not extend to cover that. In addition, cyber liability is not usually covered on a basic PLI policy and will require additional coverage.

Knowing what your customer’s business entails can help you assist them in making the best decision. Walking your customer through their choices and helping them into their most optimal insurance scenario possible can assure them that choosing you for their agent it one of the best business decisions they can make.

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