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The Most Common Professional Liability Insurance Coverage Gaps


Professional liability insurance, also known as errors & omissions insurance, is designed to protect individuals and businesses from certain losses they may sustain when providing professional services. These losses may be related to errors and omissions or negligent acts. A variety of different policies are available, including policies designed for specific industries, as well as miscellaneous policies.

Most businesses providing professional services are aware of their need for professional liability insurance. However, many businesses fail to purchase all of the coverage they need, leaving significant gaps that expose them to risk. Some of the most common professional liability coverage gaps are listed below.

1. Failing to Include Property Damage or Bodily Injury Coverage

The majority of professional liability policies will exclude bodily injury and property damage claims. However, certain professions that are at a higher risk of these types of claims may need to purchase policies that provide this type of coverage.

2. Leaving a Gap in Coverage When Switching Providers

When switching from one provider to the next, it is common for a gap in coverage to occur. To avoid this type of gap, it is important to make sure that the new policy becomes active before the old policy is inactive.

3. Misrepresenting the Professional Exposure

When a client fails to represent their professional exposure accurately, the insurance agent is unable to provide the best coverage. Unfortunately, many clients represent their professional exposures inaccurately either on accident or in hopes of saving money.

4. Failing to Secure a Sufficient Coverage Limit

A professional liability policy's coverage limit determines the amount of money your policy will pay out for a claim. If the policy's limit isn't high enough, the company must absorb all additional costs when a claim is filed, which can lead to financial ruin. Many companies fail to purchase enough coverage. This gap is especially common when defense coverage is included in the policy limit.

5. Lack of Tail Coverage

Even after a professional retires, he or she may still face claims. If the company's professional liability policy doesn't include tail coverage, there will be no payout for these claims. For this reason, it is important to make sure that professional liability policies include this type of coverage.

Gaps in professional liability coverage are common but avoidable. To make sure a policy provides all of the necessary benefits, businesses should consult an insurance agent who has substantial experience with this type of coverage, and you should make sure that your business clients are well aware of all of these potential coverage gaps when discussing their coverage.

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