Today’s business leaders are somewhat wary of financial advisors and consultants. The days of absolute trust, when these relationships carried the same reverence as those of attorney/client or doctor/patient have been swept into the dustbin of history—along with a lot of people’s life savings. What’s more, should a contemporary advisor’s recommendations fail to pan out, more and more clients are holding them financially accountable. Should you find yourself in a situation in which your client blames a financial loss on your advice, you’ll be glad to have a good professional liability insurance (PLI) policy.
What Is Professional Liability Insurance?
Also referred to as errors and omissions Insurance, these policies cover defense costs, judgments and settlements, as well as fines and penalties associated with allegations of misrepresentation. These policies also shield you against claims related to breaches of professional services, wrongful business practices, misleading advice and conflicts of interest.
What to Look for in PLI Policy/Provider
You want to work with a provider who understands your business and the associated risks. Offer a detailed explanation of your business model during your initial consultation to give the agent a clear view of your potential exposure. For example, if you’re a management consultant, your job is to make regular recommendations that affect your clients’ bottom lines in the hopes of streamlining operations. However, your client may sue you if they feel your advice actually cost them money rather than saved it. Ideally, you want someone capable of understanding all the various services you offer and what could go wrong.
Your PLI policy should include every aspect of the services and advice you offer. To that end, beware of exclusions that could leave you without coverage or subject you to a denied claim. Again, you want to be certain all your core business functions are included in the terms. If you plan to expand into certain areas as you grow, or add any other functions beyond which your company currently operates, make sure your agent is aware of it and fits you with suitable coverage.
Review Coverages for Overlap
While errors and omissions insurance will cover your company for allegations of poor advice, you’ll probably need different types of coverage for other areas of your business. Your goal should be to get them all to work together to minimize the potential for gaps in your insurance umbrella. If you treat your indemnity strategy as part of your overall risk management apparatus, you’ll be positioned to weather a wide variety of untoward circumstances.
Sadly, like so many other areas of modern life, trust in the financial services industry is eroding. If a client ever blames a financial loss on your advice, you’ll appreciate the protection your professional liability insurance policy supplies. Hopefully, you’ll never need to avail yourself of its protections. But it’s better to have it and not need it than it is to need it and not have it. Discover policy options today with CoverHound; a free quote will help you get a feel for your needs and rates.