7 Key Features of Your Professional Liability Coverage
A Professional Liability Insurance (also called Professional Indemnity Insurance) policy is typically between 50 and 100 pages long. Who has time to parse through that much insurance jargon while you’re choosing the best Professional Liability Insurance company?
Here are seven key features of a Professional Liability policy to help you choose between carriers:
1. Lawsuit Protection, Regardless of Actual Wrongdoing
Insurance has nice perks, including this one: even if you’re not at fault, your policy can help cover you in the event of a lawsuit. Maybe a client tries to blame you for a technology issue that one of your subcontractors caused – or perhaps you made an honest mistake. Either way, Professional Liability Insurance may defend your business.
2. Frivolous Lawsuit Protection
Say an unsatisfied client files a lawsuit against your business, and then drops the case. This may sound like a best-case scenario, but short-lived lawsuits can get costly. If a client drops a lawsuit or a judge throws it out before it goes to trial, you could still end up with exorbitant legal bills. Professional Liability Insurance can protect you from these cases as well as full-fledged lawsuits.
3. Professional Negligence Coverage
Professional negligence lawsuits occur when a client claims you didn’t fulfill your obligations as an IT professional (e.g., failing to deliver high quality work, causing the client financial or reputational harm, etc.). Professional negligence cases can also be covered under Professional Liability Insurance.
4. Provision of an Attorney
Your Professional Liability Insurance company can appoint a lawyer for your business. That means you won’t have to worry about finding one who knows IT laws and understands professional liabilities.
5. Employee Coverage
When starting a business, you might work as a contractor and carry business insurance that only covers you. But as you grow, hire employees, and update your Professional Liability coverage, your policy can expand to cover everyone employed by your business. Be sure to tell your insurance agent when you’ve hired additional employees.
6. Aggregate and Occurrence Limits
Your insurance has two different limits:
- Aggregate limit: the total amount your policy will cover during the policy term (usually one year).
- Occurrence limit: the amount your policy will cover for each claim.
A policy with a $1 million aggregate limit and $500,000 occurrence limit, will cover $500,000 for each lawsuits or claim you make, and the policy will cover up to $1 million total if you have to make multiple claims that year.
7. Prior-Acts Coverage
IT business owners can sign up for coverage that will cover their prior acts. Because you can be sued for technology you delivered years ago, this is a key part of Professional Liability coverage. (See “How to Choose Your E&O Retroactive Date of Inception” for more information).
More questions about what is and isn’t included in your Professional Liability Insurance? Check out “Professional Liability Insurance Basics for IT Subcontractors.”