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Manage Your Risk with Professional Liability Insurance

Professional Liability Insurance, also referred to as “Professional Indemnity Insurance,” protects you from liability arising from negligence while rendering services as a professional services consultant.

Professionals who operate their own businesses should seriously consider obtaining Professional Liability Insurance in addition to existing business owners or Commercial Liability Insurance. Many companies now contractually require Professional Liability coverage for independent contractors and service providers.

Even if your business is currently insured for Commercial Liability, you may not be covered for lawsuits arising from your services as a professional consultant. In general, Professional Liability Insurance differs from Commercial Liability in that Commercial Liability covers claims arising from bodily injury, personal injury or property damage. A Commercial Liability policy, for example, would usually cover a business for injuries incurred on business premises. Professional Liability Insurance, on the other hand, protects against financial losses from lawsuits filed by clients.

Should you fail to deliver on contractual specifications, you can be held liable for damages caused. If, for example, you provide custom application development services, and your application causes the customer to lose revenue or suffer loss of customer goodwill, you could potentially be held legally liable. The client may argue that you misrepresented the software’s capabilities, or that you were negligent in your purported area of expertise.

It is important to remember that liability coverage is one of many ways to manage and mitigate risks associated with business ownership. These action items will help you fully understand your risk of exposure and evaluate the different policies available:

  1. Calculate your risk and take necessary steps to reduce or mitigate your liability. All consulting contracts, for example, should be vetted by a legal professional versed in professional liability issues. Even contracts of minimal financial value should be reviewed by legal counsel.
  2. Find an agent. A good place to begin is with the agent who provides you with other policies – business, homeowner, auto, etc. Insurance companies will often discount rates for multiple policy holders.
  3. Shop around and ask questions. Policy costs vary greatly, based on risk, your company revenues, the type of professional consulting services that you provide and deductible.
  4. Educate yourself on insurance. There are many resources available online, one of the best being the Insurance Information Institute

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