Anyone serious about their personal or professional life doesn’t overlook insurance. There are many kinds of insurance, and because many are popular, let’s assume you know something about essential covers such as medical insurance, homeowners insurance, and general liability insurance.
However, professional liability insurance, also known as Errors and Omissions (E&O) Insurance, tends to be tricky for most people, including some professionals who need it most. But what is it exactly, who is it for, and how can you select a good plan? Comprehensive yet brief, here’s a guide to selecting professional liability insurance.
What Is E&O Insurance?
Professional liability (or indemnity) insurance covers you or your company against suits where the claimant/plaintiff indicates that a service you provided or failed to provide to a client caused them to suffer financially due to mistakes/errors, or omissions.
In layperson’s language, E&O is a type of corporate insurance. It covers professional services rendered if a client claims to have suffered losses from such services, mistakes, or failures during service provision.
The insurance basically covers the company’s defense costs in lawsuits. Specific damages may also be awarded regardless of the outcome of the legal action.
Now that you have the general picture, it’s essential to carefully choose a professional liability insurance that will work for you. Of course, insurance plans differ from one company to the other in terms and conditions, premium amounts, fees, and the specifics of coverage.
Choosing An E&O Insurance Provider
Some policy providers also offer multiple plans based on costs and terms. Below are some of the most important factors to consider when selecting E&O insurance.
1. Consider the Company’s Specialization
There are various types of advisory and consultancy service providers. Some specialize in legal, medical, spiritual, engineering, psychology, and career fields.
The same case applies to insurance companies. Some specialize in pet insurance, health insurance, medical insurance, homeowners insurance, and general liability insurance, just to name a few. Not all insurance companies provide all or at least a few of these types of policies.
Before choosing professional liability insurance from Company X, consider its primary specialty. You may also want to get more specific and look for an E&O insurance company that provides coverage for your profession, business, or area of expertise.
2. Assess Company History and Track Record
You don’t have to necessarily find out who started the company, how much they pay for their stuff, and such stuff. However, a company’s track record is essential before buying a policy.
Consider the firm’s reputation in terms of their previous clients’ comments and experiences. You may want to get specific information such as:
- How many clients have they covered so far?
- How many of their clients suffered damage or liability?
- Did they respond promptly to the issue?
- Was there compensation?
- Within how long did they compensate the client concerned?
You may also want to check the company’s scores on renowned review sites and directories such as BBB, Yelp, Angie’s List, Google, etc. Social media platforms also have plenty of resourceful information.
3. Think about the Insurer’s Financial Strength
Choose an insurance company that can compensate you. Go for a company with robust financial strength.
Stay away from companies that have declared bankruptcy or insolvency. Beware of firms that have issued a profit warning or are facing numerous court cases. More often than not, these can lead to denied or delayed compensation even if you qualify for it.
4. Find out the Scope & Extent Of Coverage
How comprehensive is the E&O coverage? When such issues arise, you may often have to settle some of the legal fees or compensate the client for any financial loss before you can seek the company’s compensation.
Some companies cover everything first to ascertain whether the suit or claims are genuine. Confirming that the company or policy you settle for covers as many of these issues as possible is essential.
There’s also the question of how much your policy can cover financially. Most policies limit the amount and extent of damage they can cover.
5. Know Your Premiums
Like any other type of insurance, professional indemnity insurance has periodic payments, called premiums, varying from cover to cover and company to company.
Choose the plan you can afford without breaking the bank, but remember to consider how much it can do for you, as discussed earlier.
6. What’s The Eligibility for Compensation?
What factors does the company require you to fulfill before being eligible for compensation?
Several essential factors, such as the risk’s occurrence, are involved. Beyond this, some companies may have their own additional preconditions. Dig deeper to avoid inconveniences, frustrations, and shocks when and if a risk occurs in the future.
7. Is the Policy Transferable
Can the policy be transferred to another individual, say an heir or relative?
Will it still serve you if you move to a distant location outside the country or state? Why pay high premiums that will become invalid once you relocate or migrate to a different country?
8. Don’t Forget Penalties & Late Payment Fees
Due to circumstances beyond your control, you may fail to remit your premium according to schedule. What follows next varies from company to company.
You never know when an accident will happen, such as falling down stairs or one of your staff members being bitten by an animal while working in the field and needing medical attention.
Find out if they impose penalties and fees for late payment and how they treat complete defaulters.
Clearly, professional liability insurance is crucial for professionals from most service industries.
However, it’s even more critical for high-risk professions such as medical, legal, reputation management, etc. And don’t forget, sometimes these policies are specific.