Businesses rely on professional liability insurance (PLI) to cover general liability and additional customer and client service claims. This type of business insurance (also known as errors and omissions insurance or malpractice insurance) aims to protect professionals from public claims of error and omission. Businesses face uncertainty and require coverage to stay afloat amidst unpredictable events. Businesses seek out PLI coverage to go above and beyond General Liability coverage so they are protected against claims of negligence and damages by third-party individuals and other companies.
The cost of PLI is influenced by numerous factors, including the individual specifics of the business and industry. Some factors that affect premiums are location, the number of years in business, applied coverage limits, and the size of the business. Additionally, specific factors further influence the cost of PLI, such as businesses that provide government services. In a case like this, the business may need to follow legal guidelines for the coverage amount.
What you do for work affects coverage. Professionals with risks of client injury liability require more coverage than professionals working from home. Although PLI is a specialized type of business insurance, it is usually more cost-effective than General Liability insurance alone, as it protects you from legal costs you’d have to cover without it. For more information on how much you should pay for Professional Liability Insurance, continue reading below.
Public Liability Insurance vs. Professional Liability Insurance
Do not confuse Professional Liability Insurance with Public Liability Insurance and General Liability Insurance. Here are the main differences:
Public And General Liability
- On average and, across industries, Public Liability Insurance is approximately 10% less than General Liability Insurance. The reason for this cost break is coverage limitations, which makes this type of coverage particularly helpful for businesses looking to save.
- This type of insurance is limited to property damages and bodily injuries. It can be difficult to find public liability insurance because it is an older version of general liability.
- General liability offers increased coverage and is tailored to industry specifications.
Despite the difficulties you may face in finding public liability insurance, it is a low-cost coverage option that can protect your business from third-party claims of injury and property damage. To find affordable deals on this kind of insurance, contact a broker for specialty insurance options that work for your needs.
E & O Insurance
- Professional Liability Insurance is the only type of business insurance that will protect your business from claims stemming from negligence, including errors, misrepresentation, and malpractice.
- As a specialty coverage, it is not included in individual policies for business owners. Businesses seek out PLI coverage to indemnify themselves from losses stemming from the claims made within the policy period that deal with errors, omissions, and negligence.
Businesses need PLI to cover losses stemming from quality of performance, namely the “errors and omissions” of:
- Failure To Deliver
- Inaccurate Advice
- Professional Misconduct
- Contract Breaches
- Punitive Damages
Always speak with an advisor before deciding on a PLI policy. Sometimes, policy wording prevents incident coverages that you may otherwise overlook and need coverage for. As with any insurance, look around before choosing a plan. You may require multiple business insurances to protect your company.
Cost Factors Of PLI
Some factors that influence the cost of PLI include where your practice is, your professional field, and the total number of claims against you. The number of employees working for you and how long you’ve been in business all influence your policy price. The company claims history also impacts premiums. Coverage limits and deductibles also affect policy prices.
Average Costs Of PLI
On average, PLI is about $59/month and between $500- $1000 annually for most policies. Some policyholders pay around $61 monthly, equivalent to around $735 annually. These figures are medians that exclude outlier premiums (significantly higher and lower than the average.) You can also work directly with insurance companies to find the plans that will suit your budget.
Policy Limits Affecting Policy Costs
Your policy limits also directly influence how much you pay for PLI insurance. Businesses that provide services influencing their clients’ incomes are better protected with higher Professional Liability Insurance policy limits, as these cover those more susceptible to facing lawsuits. Although higher limits are more expensive, they are justified, as they also cover more costly claims. If your profession exposes you to a higher risk of lawsuit, you will likely pay more on your E&O policy.
Lower-cost specifications are applied to small business owners. Over 50% of small business owners own policies with a $1 million “per-occurrence limit” and another $1 million for their “aggregate limit.” Your deductible also affects the cost of your policy. Policies with higher deductibles are less expensive; however, you need to meet that amount before you can collect. The average deductible chosen by Professional Liability Insurance policy owners is $2500.
Here are some cost factor specifications to keep in mind:
- The more employees that work for you, the more likely clients will file lawsuits. You will pay more for your Professional Liability Insurance policy to account for these risks.
- If your company has had past Professional Liability Insurance claims, your insurance company may feel you are riskier to insure; therefore, you may be required to pay more than those without a history of claims.
- Bundling policies may help you save on your Professional Liability Insurance. By bundling, you can save money without missing out on the coverage you need. For example, your profession may render you eligible for cyber liability insurance that you can bundle with your Professional Liability Insurance as part of a technology-related subsection. You’ll be saving more by bundling than you would by purchasing separate policies in most cases.
Comparing Your Options For The Best Coverage
Most policyholders will pay a max of $61/month for Professional Liability Insurance coverage. However, various business-related and location-specific factors apply that affect policy costs. Contact an insurer you trust for a quote and compare your options to find the best coverage plan for your business.
