Anyone who owns or manages a small business understands that the smallest mistake made by an employee can open the company up to legal liability. Nobody is perfect and occasionally employees will be less than diligent. This is to be expected in virtually any company, and business owners and executives need to be prepared to handle such a situation should it arise. One of the best ways to protect the company when this happens is by purchasing professional indemnity insurance.
Insurance is an excellent way to protect the company because it provides a safety net in the event the business is sued by a client or customer. This often occurs when businesses in specialized industries make a mistake regarding a customer's confidential information. For example, attorneys and physicians often carry this type of insurance since their customers entrust them with some intimate and personal information. In fact, many states require these industries to purchase the insurance to ensure customers are protected.
One downside to holding this type of insurance policy is the fact that it can be quite expensive. Imagine the risk involved in insuring another individual's company full of numerous employees all subject to make a mistake at any time. Hopefully these mistakes will not be devastating to the business or the insurance policy, but premiums are still likely to be high given the uncertainty. Conversely, the business owner also should consider the cost and benefit analysis of owning this type of insurance. While monthly payments to the insurance company may be quite high, coverage is definitely worth the expense. Being protected from a lawsuit can be the determining factor in whether or not your company survives if a truly substantial mistake is made.
Each business owner will need to look at the individual company's financial situation, however, before determining whether or not to purchase professional indemnity insurance. Small risk enterprises may decide that such coverage is unnecessary. Industries that involve more customer to employee interaction, or industries that hold customer's private information, may determine that the insurance is worth the investment.
Finally, be sure to consider all the options prior to purchasing this type of insurance. Some companies are more affordable than others, and there is no reason to pay more over a period of months simply for failing to price shop. Exercising proper due diligence in this area can truly save the company a substantial amount of money over the course of months and years.
Insurance is an excellent way to protect the company because it provides a safety net in the event the business is sued by a client or customer. This often occurs when businesses in specialized industries make a mistake regarding a customer's confidential information. For example, attorneys and physicians often carry this type of insurance since their customers entrust them with some intimate and personal information. In fact, many states require these industries to purchase the insurance to ensure customers are protected.
One downside to holding this type of insurance policy is the fact that it can be quite expensive. Imagine the risk involved in insuring another individual's company full of numerous employees all subject to make a mistake at any time. Hopefully these mistakes will not be devastating to the business or the insurance policy, but premiums are still likely to be high given the uncertainty. Conversely, the business owner also should consider the cost and benefit analysis of owning this type of insurance. While monthly payments to the insurance company may be quite high, coverage is definitely worth the expense. Being protected from a lawsuit can be the determining factor in whether or not your company survives if a truly substantial mistake is made.
Each business owner will need to look at the individual company's financial situation, however, before determining whether or not to purchase professional indemnity insurance. Small risk enterprises may decide that such coverage is unnecessary. Industries that involve more customer to employee interaction, or industries that hold customer's private information, may determine that the insurance is worth the investment.
Finally, be sure to consider all the options prior to purchasing this type of insurance. Some companies are more affordable than others, and there is no reason to pay more over a period of months simply for failing to price shop. Exercising proper due diligence in this area can truly save the company a substantial amount of money over the course of months and years.
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