You hear horror stories of businesses like yours getting sued by unsatisfied clients and losing their capital. It can get so bad that the business flounders and goes bankrupt, or worse − it gets snatched up by a competitor.
Businesses take time to build, and if your business is sued for malpractice, contract breach or some other such issue, you can lose it before it’s even off the ground. Professional liability insurance will help safeguard your finances and keep your business afloat should such a negative customer experience occur.
What is Professional Liability Insurance?
Professional liability insurance, also commonly referred to as Errors & Omissions insurance, is a type of liability insurance that provides financial protection for service-providing and professional advice-giving businesses facing litigation for negligence.
Professional liability insurance (PLI) protects small businesses when a client has accused them in court of failing to execute the services they had promised to said client. A client or customer can sue a business for suffering a financial loss as result of following the business’s advice or if the business did not perform promised services.
Crunching the Numbers
According to courtstatistics.org, the average cost of a business lawsuit starts at $54,000 in a liability sit. In a contract dispute, the cost can reach as high as $91,000. Looking at a statistical breakdown of small business profits in their first year, business know-how found these revealing profit numbers:
− 29 percent of small businesses made less than $10,000
− 8 percent of small businesses made less than $25,000
− 15 percent of small businesses made less than $50,000
− 8 percent of small businesses made less than $75,000
− 5 percent of small businesses made less than $100,000
− 5 percent of small businesses made less than $150,000
− 4 percent of small businesses made less than $200,000
− 12 percent of small businesses made less than $400,000
− 10 percent of small businesses made less than $1 million
The statistics show that more than half (52 percent) of all small businesses in the United States make at most $50,000 in their first year of business. Considering that the average cost of a lawsuit is $54,000, it would not be misleading to say that these same businesses would not be able to cover the costs of litigation. Another stark reminder that small business ventures are not foolproof is brought by Inc. Magazine. According to their findings, 96 percent of small businesses fail before they hit their 10-year mark. No one starts a small business to see it run into the ground after less than a decade of having its doors open.
Some ways to guarantee that your business succeeds is by investing in insurance packages like professional liability insurance, liability insurance, property insurance and business owners insurance. In taking out more than one small business insurance policy, you are protecting your business from a multitude of disastrous business scenarios, including fraud, equipment failure and customer dissatisfaction.
The only thing business insurance can’t do is remove a negative Yelp review, but who needs it when your business has a solid reputation thanks to the efforts of your employees and insurance provider? Find your professional liability insurance with CoverHound, before it’s too late.