What do people mean when they talk about professional liability insurance? Is this the same as E&O insurance, or is it different? Make sure that you're protected as insurance professionals; get the right insurance and the right amount of insurance for your agency.
What Is Liability?
Liability is the state of being legally responsible for something. For instance, you could be legally responsible for clearing off your sidewalk of snow and ice. If someone slips on an icy, poorly-maintained sidewalk, they could sue you.
However, that's not what professional liability insurance is all about. As an insurance professional, you recommend insurance products, take clients' information, and help them get the insurance that they need. This exposes you to a unique type of liability, the liability of being a professional who is giving advice and helping clients make decisions and choose products.
What Is Liability Insurance?
How are liability insurance and E&O insurance connected? According to Investopedia, "errors and omissions insurance (E&O) is a type of professional liability insurance that protects companies, their workers, and other professionals against claims of inadequate work or negligent actions." It's used to protect professionals who might make mistakes or omissions in their work that can impact clients' emotional or financial wellbeing.
While the term liability insurance is broad, E&O insurance is a type of liability insurance that's specifically designed for professionals who provide advice and services to clients. It is designed to help protect your business from legal claims that arise from your mistakes or your omissions as a professional in the insurance field.
What Is the Scope of Professional Liability Insurance?
When you're talking about getting professional liability insurance to cover your insurance agency's needs, you need to know what will be covered by your errors and omissions insurance. You need more than insurance against lawsuits. You need:
Coverage for legal fees. A lawyer's time can be expensive, and there's a lot of work that goes into settling out of court or going to court.
Document fees and court costs. The paperwork that comes with legal issues takes time and money to process.
Any settlements that arise from the lawsuit. Even if you settle out of court, you will likely need to pay your client.
Any funds required to be paid to a client due to a lawsuit. If you go to court and lose, then you'll need to fund the payment required by the lawsuit.
Choosing Your Liability Insurance
How can you choose liability insurance, and how much will it cost? That depends on what specific coverage you get and on the specifications of your business. Consider what your policy covers. For example, do you need coverage for cyber liability, such as a hacking incident at your workplace? Think about the limit of liability and how much of a deductible you are able to pay. Finally, think about what is included in your liability insurance. Compare it to other plans. Which ones cover what you need them to cover? After you've considered all of these options, you'll come down to one or two plans that seem right for you.
Are you looking for E&O insurance? Talk to us. At American Agents Alliance, we understand independent insurance agencies. We're here to help you cover your insurance bases. Contact us today to learn more about our membership benefits.