The terminology surrounding Professional Liability policies can get confusing. It’s often called Errors and Omissions (E&O) Insurance or Malpractice Insurance. All of the terms are synonymous.Malpractice Insurance usually refers to policies tailored to those in the medical profession, while E&O refers to policies for legal and insurance professionals.;
, Professional Liability Insurance is designed to protect you from legal liability resulting from your actual or perceived professional negligence.It does not cover:Liabilities resulting from general negligence, like leaving water on the floor. General Liability Insurance covers general negligence.
Liabilities from intentional or criminal acts.
Liability to your workers due to injury or wrongdoing. Workman’s Compensation or Employment Practices Liability Insurance will cover those types of liabilities.
Damage to your property. Property Insurance covers property damage.
For many professionals, such as civil engineers, physicians, and CPAs, incorporation does not shied them from personal liability.
Liability insurance covers those items for which you are held legally liable. In other words, claims involve a lawsuit or the threat of one.
Furthermore, having insurance doesn't protect the insured from being sued, no matter how frivolous the cause.
 The purpose of Professional Liability Insurance is, as the name implies, to insure you against legal liabilities incurred as a result of your professional activities. Each policy will either require the insurer to assume a “right to defend” the insured or a “duty to defend” the insured.A “duty to defend” the insured means the insurer must defend the insured from lawsuits. “Right to defend” coverage gives the insurer the option to defend the insured from lawsuits.
 Each business’ necessary level of coverage is going to be different. Mistakes in some industries, like medicine, construction, engineering, or law are inherently more expensive than mistakes in other industries. Research common coverage levels in your own industry and decide whether they apply to you.Each policy’s coverage level is going to be expressed as O/A, where O stands for the amount covered for each occurrence, and A stands for the aggregate amount covered under the policy. So 1M/5M means each occurrence is covered up to $1 million, while the total coverage under the policy is $5 million.
Coverage doesn't limit the amount of money that might be recovered by plaintiff, just the insurer's liability.
This means that if your limit for each occurrence is $1 million, but you are sued for $3 million, you are on the hook for the other $2 million.
This is why getting enough coverage is essential.
 One of the biggest mistakes people make when choosing insurance policies is to give themselves a deductible they can’t afford. Make sure your deductible is the type of cost you could easily absorb at a moment’s notice.Deductibles represent the first dollars applied to a claim even when the insurance company is defending you.
For example, you might have a deductible of $25,000 on a $1 million policy.
 Different policies and different carriers have different payment schedules. Be sure to take the payment schedule into account when choosing a Professional Liability policy.Some insurers will break payments up into semiannual or quarterly installments. Others will want payment in full at the beginning of each year. Be aware that a discount might result from having to pay in full each year.
 You’re probably not looking for different kinds of policies from the different insurers. So when you’re comparing insurers, keep a few things in mind.


Policies are available from large and specialty insurers.
However, coverages are also available through professional organizations and associations. This type of coverage will likely be specially tailored to your industry. Keep in mind, though, that you might be able to get a better price by shopping around for other options.
Make sure you’re getting an apples to apples comparison—that the items covered in one policy are covered in another policy.Once you’ve read the fine print and are sure that you’re comparing two equal policies, look for a reasonable price (perhaps with an insurer that specializes in your industry).
Finally, make sure the insurer is reputable. You can check the financial ratings of your chosen insurer at a ratings agency like Fitch, Moody’s, or Standard and Poor’s. , Each insurance company is a little different, but most of the documentation they’re after is going to be the same for each company. Before you connect with an agent or company, gather some important financial information, including:Revenue for this year, projected revenue for next year, and what proportion of that revenue comes from your largest client.
Your payroll information, including individual compensation rates for top-tier employees.
 Professional Liability Insurance is usually more customized to each business than other types of insurance. Therefore, any insurer is going to need some basic information about your business, how it’s structured, and what it does. Let them know:The total number of employees.
The type of business you do and the industry in which you operate.
The business form of your company, such as a corporation, an LLC, or a partnership.
The contact information for any and all of your business locations.
 Your prospective insurer is going to want to know exactly what they’re getting into when they commit to issuing you a policy. So you can make sure you’re covered, make sure they’re aware of the following:Any subsidiaries your company controls, and any minority ownership stakes in other companies.
What percentage of the time your company uses written contracts, how often it changes their terms, and for what reasons it uses them.
 Some business owners operate more cautiously than other business owners. Your insurer needs to understand which type owner it’s dealing with, so it will want to know several things about your insurance levels and claims history.Most insurers are going to want a complete claims history for the company you’re seeking to insure.
They will also want to know about all other types of insurance that you carry, and what levels of insurance you carry on each policy.
 Once you’ve got all of your information together, you need to fill out the actual application. Speak with an agent over the phone or in person, or complete an online application, whichever you prefer.
 Setting deductibles at higher levels is one of the easiest ways to bring the cost of your monthly premium down. Of course, a higher deductible means a higher out of pocket cost for a covered event.Don’t set your deductible higher than what you could normally absorb without warning in the usual course of business.
 Every claim you make can—and probably will—increase your monthly premium. Since policyholders who engage in the riskiest behavior usually have the most claims, your insurance company looks at each claim as a sure sign of additional risk.Think about absorbing the cost of a minor covered event—for example, making a quick settlement with someone who is considering legal action. Alternatively, you can always ask your insurer how much rates would go up if you made a certain claim, as long as you know what the claim would cost. They might not be able to tell you, but if they do, you can make a straightforward cost-benefit analysis of pursuing a claim.
 It’s always a good idea to investigate what your overall rates would be if you bundled your policies with your primary insurance carrier. Don’t forget to ask any prospective insurance carriers what they would charge if you moved all of your insurance coverage over to them.
Don’t get confused by the terminology.
Keep in mind what is and what isn’t covered.
Make sure your policy has a “duty to defend” provision.
Pick the proper coverage levels.
Set deductibles at a level you can afford.
Schedule payments that work for you.
Choose a carrier you trust.
Gather financial information.
Collect operational details about your business.
Submit information about your relationships to clients and other businesses.
Disclose your prior history of insurance claims.
Complete your application.
Give yourself a higher deductible.
Limit your claims.
Bundle your policies.
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