Protecting your business from liability is critical. If you or your business provides professional services or advice, professional liability insurance can help protect your assets if you are ever sued. It covers financial losses suffered by third parties as a result of errors and omissions in your services (it is also sometimes called E&O insurance).
Attorneys and physicians consider this type of protection a necessity; in fact, legal and medical malpractice insurance is required by law in many states. Other professionals who should explore and consider professional liability insurance include accountants, software developers, real estate agents and consultants.
According to the Insurance Information Institute, there are two types of professional liability policies: claims-made and occurrence. Most policies are claims-made, meaning that the policy must be in effect both when the event took place and when a lawsuit is filed for a claim to be paid. An occurrence policy is less common, but will cover any claim for an event that took place during the period of coverage, even if the suit is filed after the policy has lapsed (such as after you’ve retired or changed careers).
Policies will generally have a deductible ranging from $1,000 to $25,000. The amount of professional liability insurance you will need and how much it will cost depends upon the size of your business and the level of risk it poses. Coverage does not extend to losses caused by intentional or dishonest acts. Professional liability insurance also does not cover bodily injury or property damage claims (these are typically covered by commercial general liability policies).
Consult with your financial planner or inquire with your profession’s trade association about protecting your business from liability and to determine if you might need professional liability coverage.
Estimates by the U.S. Bureau of Labor Statistics in 2010 show that more than 18 million businesses are run primarily out of a home. Given recent advances in mobile and wireless technology, as well as the cost-cutting realities of a low-growth economy, that number may be even higher. If you’re considering running a home business, there are a number of things you’ll want to consider.
Operating a Home Business
First, make sure your home business meets zoning regulations and that any required licenses or permits are obtained. Many municipalities and condominiums restrict home business activities. If customers will come to your home, you may need to consider parking, disability access and display of advertising. You may also need to amend your homeowner’s insurance policy to cover commercial activities.
The IRS may allow you to deduct certain expenses — such as phone, internet hookup, a portion of your rent or mortgage — based on the percentage of space in your home that the office occupies. To qualify, the home office must be used exclusively for business; a guest room or other shared space will not qualify. The key to claiming any of these deductions is to prove that they are necessary for and confined to business use.
Finally, you should also consider how the arrangement will impact your family. Will there be tension if you’re home all day? Will your work presence cramp your family’s daily activities? How will they interact with clients or employees? Make sure to give this issue serious thought and discuss it with your family.