Buying Professional Liability Insurance

Depending on the industry you are in, purchasing a Professional Liability Insurance be vital to protecting your business. Professional Liability is a coverage designed to protect you from lawsuits arising out of giving professional advice. Many professionals carry this type of policy, including Insurance Agents/Brokers, Attorneys, Consultants, octors, Real Estate Agents, and more.

Buying Professional Liability Insurance – Occurrence vs. Claims-Made

Before you purchase Professional Liability, it is imperative you understand the difference between an occurrence and a claims-made policy as both policies cover claims very differently.

Occurrence : An occurrence policy provides coverage for damages that arise while the policy is in force, regardless of when the actual claim is reported. Therefore, with an occurrence policy, you are protected against long-term claims that are filed in the future. Example: You purchase an occurrence policy effective January 1, 2010 through January 1, 2011 and provide services to a client during that policy period. If you do not renew the policy, and subsequently get sued in 2014 for the services you provided in 2010, your 2010 policy would still cover the claim even though you are currently uninsured(subject to policy terms and conditions).

Claims-Made: With a claims-made policy, your policy provides coverage only if the policy is still in force or during an extended reporting period (also known as a “tail”). Example: You purchase a claims-made policy effective January 1, 2010 through January 1, 2011 and provide services to a client during that policy period. If you do not renew the policy or purchase an extended reporting period you will no longer have coverage. Therefore, if you subsequently get sued in 2014 for the 2010 services, you will not be covered by the 2010 policy. Alternatively, if you renewed your policy every year, or purchased an extended reporting period, the carrier that is currently insuring your policy will cover the claim(subject to policy terms and conditions).

Buying Professional Liability Insurance – Extended reporting period, or “tail”

When you have a professional liability policy, specifically a claims-made policy, you are only covered during the time you are currently insured. Therefore many people purchase an extended reporting period, also known as a tail. The tail is an endorsement on a claims-made policy that extends the period you can report claims after the policy has expired. This type of endorsement is especially useful for those who retire from their trade and would like their prior services covered, without having to renew their professional liability every year.

Do you have questions about buying Professional Liability policy? Stone Creek is here to help! Please call us at 925-297-4829.

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All information is general in nature and is intended to provide guidance only. It is up to you to request specific coverage options, the agency and agent do not bear this responsibility. Always read the policy if there is a questions about coverage or a claim. If any information herein should conflict with your actual policy’s specific language, the policy language will be controlling.