As an entrepreneur and independent contractor, it’s important to plan for emergencies. Professional liability insurance provides a safety net in the event of a disaster. Before you reach a decision on a coverage, you should think about how high you want your limit of liability insurance to be.
Professional liability insurance provides protection if you are sued based on allegations of negligence. It will cover you if you offer professional advice to your client and they pursue litigation because your advice caused them harm. If you are an independent contractor, you can use the policy if your client believes that your work didn’t meet expectations. Professional liability insurance covers your defense costs as you handle the allegations. Also, keep in mind that professional liability insurance covers you against claims based on work that you’ve done in the past, as well as work that you’ve done all over the world. As you start researching different coverage options, you have to make sure that you find a policy with the right coverage limit. Being underinsured could cause you to lose your assets based on the severity of the lawsuit.
Here are some things to consider while assessing the limits of your professional liability insurance.
1. Consider Your Budget
The limit of liability that you choose for your policy should align with your career. Think about the number of clients that you have and your potential outreach. If you work with many clients, your advice could make a positive or negative impact on a wider scale. The more clients that you work with, the more significant the litigation process could be. You should have a specific dollar amount in mind that will cover any claims against you. Be sure to factor in variables such as possible defense costs and future settlements. If you run a small business, you may not necessarily need that much coverage; however, it’s beneficial to have the extra coverage in place if a serious issue arises.
2. Evaluate Your Skills
As your career evolves, the amount of coverage you need will likely change. A lower limit is ideal as you are starting off. However, once you have established yourself and gained more clients, you should increase your coverage limits. You also have to consider important factors such as pursuing a higher level of education, learning new training methods, and adding new services to your business. These are all scenarios when you should re-evaluate your liability limits. Perhaps you may have to increase your coverage limits every year.
3. Compare with Your Peers
Regardless of the industry that you are working in, it’s a good idea to ask your peers what the limits of liability are in their policies. If a claim is filed against you, you want to make sure that your limit of liability is at par with your peers and competitors in the industry. If your liability limits are low, you will be at risk if you find yourself involved in serious litigation. You could lose some of your assets and possibly your business. You could also lose some of your clients to another business in the industry.
4. Adhere to Your State Laws
When choosing your policy’s limits of liability, you also have to make sure that you adhere to the state’s legal ramifications. Depending on the service that you provide, your state may require that you at least have a minimum limit of liability along with your licensing. If you are a member of a corporation or involved in a partnership, you should also check your state’s statutes.
5. Consider the Adequacy of Your Coverage
Before making a final decision, make sure that you are fully confident in your limit of liability. You should have enough coverage that you don’t have to worry about losing your assets if someone files a claim. The goal is to have enough coverage so that you can focus on serving the needs of your clients and growing your business.
Having the right limit of professional liability insurance can help you protect your assets if you are sued. You want to avoid having to pay for your defense costs out of pocket. If you have any questions about your insurance coverage, our experts here at RMS Insurance Brokerage, LLC will assist you. Contact us today to get started!