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Buying Professional Liability Insurance? Avoid These Common Mistakes

Mistakes made in buying professional liability insurance. Educate and be prepared

As a company that specializes in making the insurance-buying experience a better experience, we sometimes hear from confused customers. They might want help filling out the quote form or need to fix a mistake after they purchased a policy. Our goals are to fortify their confidence that they have the best policy for them and to earn their trust. That’s why our support team focuses more on educating people than selling.

We have real people (we call them “product specialists”) who answer questions all day long about professional liability insurance, whether it’s medical malpractice, dental malpractice, or errors and omissions (E&O) coverage. This customer feedback helps us adjust our coverage and website to make your experience better and less complicated.

What seems to confuse customers the most? Insurance jargon and deciding what they actually need. Keep reading to learn the 9 professional liability insurance buying mistakes we see most. This information will help simplify the insurance-buying process so you can get back to what you love — your career!

But first…

What Is Professional Liability Insurance?

Here’s a professional liability insurance definition that breaks down the basics: Professional liability insurance protects professionals in case of a client’s lawsuit alleging negligence, actual mistakes, bad advice, or misrepresentation that resulted in pain/suffering, injury or death, and/or financial distress.

Professionals typically need professional liability insurance when the risk of their mistake could cost a company, person, or family a lot of money or suffering. This means that almost all professionals — from healthcare workers and real estate agents, to dentists and personal trainers — could benefit from liability coverage.

9 Most Common Mistakes People Make When Buying Professional Liability Insurance

1. Thinking Professional Liability Insurance Covers Accidents or Property Damages

Professional liability insurance protects you in lawsuits concerning actions you took in your professional capacity. It doesn’t protect you if a client slips and falls on your property. It also doesn’t help if your basement floods and you lose all your files. In those cases, you’d want general liability (aka “slip and fall”) insurance and a business owner policy with “contents coverage” to cover property damage. At Berxi, you can add this coverage to your policy.

2. Confusing Claims-Made and Occurrence Policies

If the difference between these two types of policies confuses you, you’re not alone. Both occurrence and claims-made policies will provide you with legal defense and any settlement fees for covered claims. The difference is how long the policy covers you.

One product specialist says she defines occurrence policies as a “forever policy” because your work can still be covered after the policy expires. A claims-made policy would then be considered “temporary” as the coverage expires once the policy does.
There are various reasons people prefer one type of policy over the other. And a tail policy can usually be purchased to extend a claims-made policy.

3. Underrepresenting Your Working Hours

Say you’re working only part-time when you first apply and buy your policy. But then you add more shifts, and suddenly you’re working 40 hours a week. If a claim is filed against you and the insurance company realizes you’re working a full-time shift, it might feel you misrepresented your working hours.

It might not be a big deal at all, but the safest thing to do is call your insurance company if there’s a change in your work environment. This means a shift in something like your hours, specialty, or state of practice.

4. Only Considering Hours for Your Primary Employer

A supplemental insurance policy is purchased when someone wants extra protection on top of what their existing policy includes. This could be to assist with licensing board investigations (which work policies often don’t include), have extra funds if the work policy falls short, or cover work done outside of your policy’s practice setting. So, when asked how many hours you work per week, it’s important to consider all the settings in which you work and want to be insured for. Freelancing or considering it? The supplemental policy would cover those professional adventures as well.

5. Misunderstanding Gaps in Coverage

If you decide to cancel your claims-made policy, you could be left with a gap in coverage. Because claims-made coverage ends as soon as your policy is canceled or expires, you won’t be covered if a claim is made against your past work.

But it’s okay. A tail policy can cover this gap in coverage. At Berxi, we also give you a 60-day window to purchase tail coverage and extend your claims-made policy.

6. Not Knowing Specific Requirements

Before you go through the quote process, find out whether you are required to have specific limits of liability or coverages. For example, students in nursing schools might have a specific type of coverage they are supposed to buy. If you are a professional and already have a claims-made policy, find out what that policy’s retroactive date (or start date) is. And if this is your first policy, research whether your state requires specific limits of liability.

7. Buying a Group Policy as a Sole Proprietor

As a business owner, you might think you need a group policy. But if your business includes only you as the single provider, you don’t need to buy a group policy. You can get an individual policy that covers you and your business.

8. Buying Additional Coverage While Attending School

Going back to school? An existing policy should cover you. Feel free to call your provider to double check. And check to make sure you have enough coverage when entering clinicals.

If you are in school full-time, a student nurse policy should be sufficient.

9. Not Adding a Business Entity as an Additional Insured

If you’re the only provider in your practice, you can add your business entity (e.g., LLC, PLLC, DBA) to your policy as an additional insured — at no cost. This adds an additional layer of protection to keep your business from going bankrupt if it gets named in a lawsuit.

Have questions? Feel free to reach out to the Berxi team.

Who Is Berxi?

Berxi is a professional and small business insurance provider. Our goal is to help you take your dreams and make them possible. To do this, we know you need high-quality protection from risks and lawsuits that might derail your dreams. That’s where we come in. As part of Berkshire Hathaway Specialty Insurance Company, we offer insurance with top-rated financial strength and comprehensive coverage (learn what it means to be an A++ carrier). And we sell directly to you, making insurance more affordable along the way.


Image courtesy of istock.com/Jane_Kelly


Last updated on Oct 06, 2023.

Originally published on Dec 08, 2022.

The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice.

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