Prof Service Insurance: What's Covered?

Professional services insurance is a type of liability insurance that covers professionals in the service sector who provide specialist services and expertise, often to other businesses. This includes occupations that require specific training, degrees, licenses, and skills. The definition of professional services can vary across insurance policies and carriers, so it is important to carefully review the specific terms of your policy. Some common examples of professional services include those provided by architects, engineers, lawyers, accountants, doctors, and IT consultants. This type of insurance protects professionals against claims of negligence, malpractice, mistakes, and misrepresentation, which are typically not covered by general liability insurance policies.

Professional services insurance covers professionals such as accountants, lawyers, and doctors

Professional services insurance is a type of professional liability insurance (PLI) that covers professionals in the service sector who provide specialist services and expertise, rather than a manufactured good. This includes accountants, lawyers, and doctors, as well as architects, engineers, and scientists. These professionals require specialized training, degrees, licenses, and skills to perform their jobs.

PLI protects professionals from negligence and other claims brought by their clients. This includes mistakes, errors, and oversights in the services provided, as well as failure to meet standards or undelivered services. It is important to note that PLI does not cover criminal prosecution or all forms of legal liability under civil law.

The definition of "professional services" can vary between insurance carriers and policies. Some policies may specifically include or exclude certain services, so it is crucial to carefully review the terms of your policy to understand what is covered. For example, some policies may cover services provided by professionals such as interior designers, construction managers, or technical consultants.

Professional services insurance is typically claims-made, meaning it covers claims made and events occurring while the policy is active. However, there are also occurrence policies, which cover incidents that occurred while the policy was active, even if the claim is filed after the policy has expired.

The cost of PLI depends on various factors, including the area of practice, the field of expertise, the number of employees, and the number of previous claims. On average, PLI costs between $500 and $1,000 per year, which is significantly less than the cost of legal fees and related expenses.

It protects against negligence and other claims from clients

Professional liability insurance (PLI) is a type of insurance that protects professionals such as accountants, lawyers, and physicians against negligence and other claims from clients. It is important for small business owners to have this type of insurance because it protects them from costly legal battles and settlements that could arise from claims of negligence, malpractice, mistakes, or misrepresentation.

PLI typically covers claims of professional negligence, failure to meet a standard of care, failure to deliver a promised service on time, breach of contract, and errors. For example, if an accounting firm makes a clerical error that costs their client thousands of dollars, PLI can help cover the costs of legal defence and any settlements. It is worth noting that PLI does not cover all types of liability claims, such as bodily injury or property damage claims, which would be covered under general liability insurance.

The cost of PLI depends on various factors, including the profession, the number of employees, the number of claims made against the business, and the location of the business. On average, PLI costs between $500 and $1,000 per year, which is significantly less than the cost of a lawyer and court fees.

Professionals with expertise in a specific area should consider PLI because general liability insurance policies do not typically cover claims arising from negligence or mistakes. PLI provides essential protection for small businesses, as mistakes can happen even to the most careful and experienced professionals.

In summary, PLI is a crucial form of insurance for small businesses and professionals offering services to clients. It provides protection against negligence and other claims, helping to cover legal defence costs and settlements. By having PLI, small businesses can have peace of mind knowing that they are protected from costly legal battles and can focus on running their business.

It does not cover criminal prosecution or all forms of civil liability

Professional services insurance, often called professional indemnity insurance, is a crucial safeguard for businesses offering specialized services or advice. This type of insurance protects against potential financial losses arising from claims made by clients who have suffered financial harm due to the policyholder's alleged negligence, errors, or omissions in the delivery of professional services. While this insurance provides valuable protection, it is important to understand its limitations. One key exclusion to note is that professional services insurance typically does not extend coverage to criminal prosecution or all forms of civil liability.

The exclusion of criminal prosecution under professional services insurance is standard across the industry. This means that the policy will not provide any financial support or legal defense if the insured individual or business faces criminal charges. Criminal prosecution refers to legal proceedings brought against an individual or entity by a governmental body, typically involving allegations of criminal wrongdoing, such as fraud, embezzlement, or intentional misconduct. Since professional services insurance is designed to protect against civil liabilities, it does not offer any safeguard in the event of criminal charges, which are considered separate and more serious in nature.

Similarly, the policy's protection does not typically extend to all forms of civil liability. Civil liability arises when one party suffers a loss or harm and seeks compensation from another party through a civil lawsuit. While professional services insurance covers many types of civil liabilities, there are certain exclusions. For example, it generally does not cover liabilities arising from intentional acts, such as defamation, fraud, or malicious prosecution, as these involve deliberate wrongdoing rather than negligence or errors. Additionally, it typically excludes liabilities related to bodily injury or property damage, as these are usually covered under separate insurance policies, such as general liability insurance.

Another important aspect to consider is that professional services insurance typically does not cover liabilities arising from regulatory proceedings or disciplinary actions brought against the insured by a professional regulatory body or licensing authority. These proceedings can result in fines, sanctions, or even the suspension or revocation of a professional license. It is crucial for professionals to be aware of these exclusions and consider additional insurance coverage or risk management strategies to address these potential gaps in protection. This may include seeking specialized insurance policies or endorsements that specifically cater to their industry or unique risks.

In summary, while professional services insurance provides essential protection for businesses and individuals offering professional services, it is important to recognize that it does not cover every potential risk. The exclusion of criminal prosecution and certain forms of civil liability means that professionals must carefully consider their potential exposure to risks that fall outside the scope of this insurance. By understanding these limitations, businesses can take proactive steps to manage their risks effectively and ensure they have the appropriate coverage in place to protect their financial well-being and reputation. It is always advisable to review the specific terms, conditions, and exclusions of any insurance policy carefully to ensure it meets your unique needs and requirements.

The cost depends on the area of practice, the field, and the number of previous claims

The cost of professional services insurance is dependent on a variety of factors, including the area of practice, the field, and the number of previous claims.

The type of work carried out by a business is a key determinant of the cost of professional services insurance. For example, a yoga instructor will likely pay less for insurance than an engineer due to the lower-risk nature of their work. Similarly, businesses that offer advice to clients will usually pay more for insurance than those that do not, as they are more likely to face accusations of negligence.

The number of previous claims made by a business will also impact the cost of professional services insurance. For instance, an accountant who has provided faulty tax advice that resulted in a claim is likely to see an increase in their premium.

The size of a business, including the number of employees, will also influence the cost of insurance. Typically, larger businesses with more employees will pay more for insurance than smaller businesses.

The industry risk associated with a particular field will also affect the cost of professional services insurance. High-risk businesses, such as publishers, tend to pay more for insurance than low-risk businesses. This is because mistakes made by high-risk businesses can have serious financial repercussions for clients.

The cost of professional services insurance also depends on the area of practice. For example, a small business owner in San Francisco will likely pay more for insurance than a small business owner in a small town in Montana due to differences in state regulations and population size.

In addition to these factors, the cost of professional services insurance can also be influenced by factors such as the number of years a business has been in operation, the level of coverage desired, and the business's property value.

Professional services are businesses that offer services and expertise, rather than manufactured goods

Professional services are typically businesses that offer services and expertise rather than manufactured goods. These businesses often provide vital services to other companies, helping them maintain critical IT infrastructures, remain legally compliant, manage payroll, and grow their business.

Professional services are often defined by the specific training and qualifications required to perform the job. For example, doctors, lawyers, and accountants require professional degrees and licenses to practice. In addition, these professionals need to possess certain skills and expertise that are acquired through specialized education and training.

Professional services can be provided by individuals, partnerships, or corporations. The services provided can vary greatly, even within the same field, and may include fixed rates or be charged based on the number of people engaged or the success of a project.

When it comes to insurance, professional services are typically covered under specialty policies like malpractice and errors and omissions policies, rather than general liability policies. This is because professionals with specific expertise require protection against claims of negligence, malpractice, mistakes, or misrepresentation, which are not covered by general liability insurance.

The definition of "professional services" can vary between insurance carriers and policies, so it is essential for businesses to understand what their policy covers and to ensure that any services they provide are included in their coverage.

Frequently asked questions