What Does the Insurance Policy Cover?

What Does the Insurance Policy Cover?

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A professional liability insurance policy covers a number of crucially important scenarios. These scenarios hold such monumental weight because, in order to defend your company or other organization against them, you will find that expenses can easily escalate to an unmanageable pitch. To say the least, this is a frightening prospect to many small business owners and new business proprietors, though the thought of mounting a defense against certain claims can still make seasoned commerce professional nervous. For the sake of one’s peace of mind, along with the sake of a smoothly flowing work procedure not slowed down by latent threats, you will need to learn as much as possible about ways to protect your company. One primary way you can protect your company is through professional liability insurance.

Unlike standard liability insurance which usually responds to claims that your business is responsible for bodily injury incurred by a customer or damages incurred by a client due to false advertising on your company’s part, professional liability does not defend against claims that deal in such “direct” harm. What professional liability, or Errors and Omissions, does cover is equally important, if not more so. For consulting firms, internet technology experts, medical professionals, and many others, professional liability can literally be a company saver.

What is Not Covered

It may be helpful to discern precisely what Errors and Omissions coverage provides for by looking at things it does not cover and by understanding the difference between PLI and Errors and Omissions. These are categories that are (on a normal basis) provisioned for in what is referred to as “standard’ liability. New business owners along with those owners who have seniority frequently get these two insurances confused. This common confusion can be harmful to a business’s operations and future financial health as a proprietor may assume that he or she is covered for various scenarios only provided for in the other policy type.

Some of the matters not covered by professional liability or E&O insurance include physical harm and/or property damage. Fraudulent, or criminal, activity is strictly not covered. However, you may find in some professional liability agreements that your legal defense fees are underwritten by your insurer unless/until it is determined in court that you are at fault. Because this is a detail that could have a substantial impact if you ever found yourself in this situation, you will want to make absolutely certain you understand related stipulations within your policy. Also, you are not covered for any false advertising on your company’s part, though standard liability usually does provide for this.

What is Covered

Your professional liability policy covers a great deal of scenarios. The information you will find about it in your research will most likely hold true to a certain degree with your particular insurer, but you will still want to confirm this, as every provider is different. While this does not constitute a comprehensive list, some of the areas covered by Errors and Omissions include copyright infringement claims, alleged or real negligence, alleged or real failure to account for a critical aspect in the manufacturing of a product, some defense costs, and much more.

The general rule of thumb regarding what the insurance policy covers and your professional liability insurance cost is this: any allegations against your company that claim a client or customer suffered a financial loss after the use of your product, be that an object such as a software program or your company’s professional council. The claim hinges upon the idea that your business exercised negligence or that a product did not live up to its promised quality and thereby cost a client substantially.