Business Insurance for Professional Services

Yes, it's always a good idea to carry insurance—and in some cases, it's required. Specifically, lawyers and other professionals may need business insurance in these situations:

• You have employees. State laws typically require workers' compensation insurance as soon as a business hires its first employee.
• Your business owns a vehicle. In almost every state, vehicles owned by a business must be covered by commercial auto insurance.
• Insurance is required for your profession. Lawyers and other professionals may be required to carry professional liability insurance coverage, also called malpractice insurance or errors and omissions insurance, to work in their state. Or, they might need to report whether or not they have coverage.
• Your clients require insurance. Some clients will include a requirement for business insurance in the terms of a contract.
• You want to rent an office. Landlords may require you to carry general liability insurance as part of the terms of a commercial lease.
• You need a loan. Similarly, lenders may want to see a certificate of general liability insurance before they will approve a business loan.

Business insurance is a crucial part of risk management. Without it, a liability claim from an accident could financially devastate your business. Clients may also choose to work with a business that has insurance over one that's uninsured.

Depending on your type of business, you may need protection for other risks and liabilities. Professional service business owners should also consider:

• Business interruption insurance: Often included in a business owner's policy, this coverage helps your business recover from a temporary closure due to a fire or storm. For coverage beyond your normal operating expenses, look to extra expense coverage.
• Employment practices liability insurance (EPLI): This policy helps pay for legal fees when an employee sues over a violation of their rights, such as wrongful termination, discrimination, or harassment.
• Directors and officers insurance (D&O): If an officer or board member is sued over a decision they made on behalf of your company, D&O insurance can cover their legal costs.
• Commercial crime insurance: Fidelity bonds and other types of commercial crime insurance can protect your business and your clients in the event of employee theft.
• Surety bonds: A surety bond acts as a financial guarantee that your company will fulfill the terms of its contract with a client.
• Equipment breakdown coverage: This policy covers financial losses when a piece of specialized machinery or equipment that you depend on suffers a failure.
• Commercial umbrella insurance: When your general liability, commercial auto, or employer's liability insurance reaches its limit on a claim, umbrella insurance activates to provide additional coverage.

Another common protection for professional service businesses is a hold harmless agreement, also called an indemnity agreement. In short, it's a contract in which those who work with you agree they will refrain from suing your business in certain situations.