Why Your Business Needs Professional Liability Insurance

Accidents happen. Everyone makes mistakes. Failures are really learning opportunities. As a small business owner, you’ve heard them all—maybe in a past life, you’ve said them all. But when accidents, mistakes, and learning opportunities affect client satisfaction, you’re not thinking about growth, you’re thinking about the bottom line.

Fortunately, when accidents do happen in a professional context, professional liability insurance exists to mitigate the damage. As our own act of due diligence, we’d like to help you learn why your business needs professional liability insurance, including what it is, why it’s important, and how it can benefit your business.

What Is Professional Liability Insurance?

Professional liability insurance, or errors and omissions insurance, protects your business from claims of having rendered unsatisfactory or incorrect services to clients. If a client is dissatisfied with the service provided by your business, they may not just ask for a refund—they could file a lawsuit against you and your business. This insurance covers your legal fees, as well as any damages the court may award to the plaintiff.

Why Does It Matter?

Not only does professional liability insurance cover the expenses of legal procedures, but it can also give you peace of mind. Running a business can be stressful, even without the added concern of legal troubles. Knowing that your business is covered in the event of any claims can help alleviate that stress. In addition, it can provide your clients with peace of mind, too, as it proves you are serious about your work and are willing to take responsibility if something goes wrong.

Furthermore, many businesses are required by law or contract to have professional liability insurance. Industries such as healthcare and finance have strict regulations in place that mandate the purchase of this type of insurance. Some clients or companies even require proof of insurance before working with you. Knowing how to get insurance coverage for your small business and purchasing all necessary policies helps you expand your range of clients and prevents any legal obstacles that could arise from contract requirements.

What Are Its Benefits?

If your business provides professional services, it’s likely that you need professional liability insurance. Professionals such as lawyers, accountants, doctors, and consultants rely on precision and expertise in their fields, and critical errors and omissions can jeopardize that expertise. Professional liability insurance can cover your business in cases of unintentional copyright infringement, defamation, and other claims, protecting your reputation and financial security in case of an unexpected lawsuit.

When mistakes happen, correcting them is essential. Not only does professional liability insurance protect your finances and reputation, but it can also give you peace of mind and help you secure new clients. While we hope you’ll never need to use this product, having it in place can save your business in the event of unforeseen circumstances—make no mistake about that.

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Professional Liability: Law and Insurance (Lloyd’s Commercial Law Library)