Should my business carry professional liability insurance?

Should my business carry professional liability insurance?

f1b8b678-e686-4e75-baf6-ab2ae45eeb22A recent report from Chubb Corp. found that many privately held companies are critically underinsured. Only one-third of the survey participants had purchased professional liability insurance, which protects a business against a number of risks.

As any Chicago business attorney knows, any company – public or private – can benefit from carrying such a policy. It is important for business owners in Illinois and across the country to understand what the insurance does and how it works.

What it covers

There are several risks that professional liability insurance covers, such as the following:

  • Damage to someone’s property
  • Slander, libel or other personal injury
  • Bodily injury
  • False or misleading advertising

The Chubb Corp. survey found that many businesses felt their commercial general liability insurance policy was sufficient in mitigating the risks of such damages, but experts advise that this is not always the case.

Should you get it?

The U.S. Small Business Administration points out that carrying a professional liability policy is especially important for business owners seeking protection against lawsuits. The agency notes that nearly two-thirds of businesses in the country are either sole proprietorships or partnerships, which can leave an owner personally responsible in the event of an event that results in damages.

In fact, certain business types may be required to purchase a professional liability policy, which is also called errors and omissions insurance. For example, physicians are required to purchase a policy to cover malpractice. In some instances, a client may request that a business carry such a policy. Some people are more comfortable working with a company that offers the protection of liability insurance.

Generally, any company that provides a service to clients should carry professional liability insurance. Commonly, accountants, attorneys, engineers, consultants and architects carry this type of policy. While the law does not require every Illinois businesses to have such coverage, the SBA recommends that business owners acquire it in order to protect themselves from the damaging cost of defending a lawsuit.

Cost of coverage

As a Chicago business attorney would know, the cost of a policy will fluctuate depending on how much coverage a business wants. It is common for a provider to sell a policy based on limits in increments of $1 million per claim, though many insurance companies can cater the policy to fit a business’ particular needs. The premium is set based on factors such as the limit and any prior claims made on such a policy in the past.

 

Before business owners purchase any insurance, it is important for them to understand what their risks are. Anyone with questions regarding professional liability insurance policies should consult with a Chicago business attorney.

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