What is professional liability insurance?
Professional liability insurance covers the company and its employees against claims for negligence in the provision of the company’s professional services.
Third party liability insurance not enough?
Third party insurance covers the company against claims arising from bodily/property damage. Professional liability insurance, on the other hand, covers claims arising from financial damage caused to third parties, but the requirement is that the company’s negligence stems from its professional expertise. Also, third party insurance sometimes includes a professional liability exception.
How does the coverage work?
The insurance is on a claim basis. That is, in order to have coverage according to the insurance, it is necessary for the insurance to be valid at the time the claim was filed. In addition, that the claim was filed for an act that occurred after the retroactive date specified in the insurance. Therefore, there is a need to renew the insurance every year, in order to take care of maintaining the insurance coverage and continuity.
Is it correct to take out professional liability insurance for every profession?
Each profession has its own specific expertise. That’s why there is a difference between insurance for a technology company, and an investment portfolio manager, an economist, an accountant or a sports coach.
For example – as far as professional liability insurance for sports coaches is concerned, the main concern is bodily harm caused to a third party during training. Therefore, in some cases it would be more appropriate to take out third party insurance, which includes cancellation of the professional liability exception. In this way, the insurance increases can be significantly reduced. In addition, third party insurance is on an event basis. Therefore, there is no need to renew the insurance every year, in order to maintain the coverage.
On the other hand, in insurance for a high-tech company that provides SaaS services, the main concern is financial damage. Therefore, in such a case third party insurance with exceptional cancellation will not help. Therefore, it is necessary to purchase insurance adapted to high-tech companies. Therefore, before purchasing the insurance, it is necessary to understand what is the risk that we want to cover with the insurance.