Small businesses are generally much less prepared to deal with liability lawsuits than larger corporations, as a single judgment made against them could put them out of business.
For this reason, companies of this size rely heavily on insurance policies, one of the most important being professional liability insurance, which can help cover legal and court fees if ever sued.
However, these policies aren’t one size fits all, so small business owners need to ask numerous questions when purchasing this this type of insurance.
1. Who is covered?
One of the most important questions to ask when obtaining professional liability insurance is who is covered. Of course, small business owners will want their company to be protected, but coverage could also extend to employees. This is essential information to know, especially in industries with high risk, as employees will want to know whether or not they need to purchase coverage of their own.
2. What is covered and what is excluded?
Another question that needs to be asked is what will the policy cover. Generally, professional liability insurance will kick in to protect against lawsuits stemming from negligence, errors and omissions. When faced with a lawsuit, small businesses could have financial and legal assistance, such as help paying for legal fees as well as having a lawyer provided.
These policies won’t cover everything though, as there are certain exclusions. For example, if an employee knowingly commits an error that breaks the law, chances are this won’t be covered by professional liability insurance.
3. Is the policy claims-made or prior acts?
When purchasing professional liability insurance, a policy could either be claims-made or prior acts. This is necessary information to know, as it will help small business owners be aware of what is covered. Claims-made policies will provide coverage for liability claims that take place during the policy if the incident occurs after the retroactive date.
Meanwhile, prior acts coverage provides protection for claims filed prior to the policy period. This type of policy is generally purchased when a company is looking to replace its current professional liability insurance.
4. How much coverage do I have?
Small business owners will want to know much coverage their policy will provide them with as well. The limit of liability will be the highest amount that can be paid out for claims, so companies with high risk will want to ensure this is high enough to cover their expenses if sued.