Professional Liability
One type of professional liability insurance is also known as Errors and Omissions Insurance and should be included as an essential part of your insurance program if the business is a type that provides professional advice or services. In order to arrange commercial general liability coverage, you will be required to carry adequate limits for errors and omissions insurance. Errors and Omissions Insurance provides coverage in the event your advice causes loss or injury to your client. Without this important protection, commercial general liability insurance may not be offered.

The second type of professional liability insurance is known as Malpractice Insurance and is generally used where the substandard conduct may result in bodily injury. Common professions where you'll find this coverage offered is with physicians and dentists. This malpractice insurance has seen a large rise in insurance premiums over the last several years due to the large number of lawsuits attributable to these types of professions.

Director and Officers Liability
Designed to help protect both the assets of the company and the personal assets of the individual, D&O insurance covers those liabilities that may result from an individual or group performing their task(s) as directors or officers. Anyone acting as a director or officer for a legal entity is covered under most plans. This includes positions of chairman, deputy chairman, president or vice president of the board of directors, the managing director, general manager, comptroller, secretary or treasurer and any other person who performs the corporate functions similar to those performed by an officer.

Depending on deductibles and other variables, D&O insurance can cost roughly $60 to $100 per employee per year. A typical deductible is $5,000. Therefore, it may be cheaper to take care of the more inexpensive problems without the insurance, and choose a higher deductible to save money in the event of a larger suit.

Practice Question:
Dennis owns a financial planning firm with two active traders that handle all client trades. He is worried that either of them could make a trading error that could cost him a large amount of money to correct the mistake. What type of insurance policy would help him transfer this risk?
A. Business General Liability policy
B. Umbrella policy
C. Professional Liability policy
D. Directors and Officers Liability policy

Answer: C
A professional liability policy is also referred to as an errors and omissions policy, these policies protect business owners in the event of employee professional service errors.



Worker''s Compensation

Related Articles
  1. Insurance

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  2. Insurance

    Filling The Gaps In General Liability Insurance

    Standard liability coverage may not be enough. Special needs call for specialized policies.
  3. Financial Advisor

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  4. Insurance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  5. Insurance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  6. Insurance

    What Does Errors and Omissions Insurance Cover?

    Errors and omissions insurance protects companies and individuals against claims made by clients for inadequate work or negligent actions.
  7. Insurance

    Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.
  8. Managing Wealth

    Asset Protection for High Net Worth Individuals

    OK, you've made it. Here's how to hang onto it.
  9. Insurance

    Is It Safe To Be Without Umbrella Insurance Today?

    At low cost, you can buy significant extra liability coverage in case you're sued due to an accident or other trouble. See it as bankruptcy protection.
  10. Insurance

    Insurance, Excess Insurance and Reinsurance: What's the Difference? (ALL)

    Understanding the differences might help you avoid being overinsured or underinsured.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center