Professional liability insurance: necessary or not?
Making mistakes is human, and as an employee of a company you are insured for any damages. As an independent professional, this is not the case: just as you have to take care of your own health care and pension, you have to arrange your own professional liability insurance. What do you need such insurance for and how do you arrange one?
Why do you actually need professional liability insurance? As an independent professional, you work independently: you know best how to do your job and advise your client on your specialty. No matter how good you are at what you do, everyone makes mistakes from time to time. If you are not insured, a mistake can cost you dearly. For faulty advice, negligence or wrong actions, your client can claim damages.
Example
Imagine you have created a computer program that contains an error. As a result of that error, your client's system goes haywire. As a result, the company cannot deliver and misses out on a large amount of sales. Your client sees this lost revenue as damage and wants to recover it from you.
Professional liability insurance
With professional indemnity insurance (BAV), all costs surrounding this type of claim are covered. Not only any damages you have to compensate, but also legal costs. It does not matter if the claim is justified.
Professional liability insurance: necessary or not?
What if I already have third-party insurance?
Some self-employed people think that their liability is already covered through their personal third-party liability (WA) insurance, but this is not true. In fact, private insurance does not provide any coverage for damage caused from your work.
Liability insurance by profession
Professional liability insurance mainly covers errors in advice or violation of intellectual property rights. In addition, as a self-employed person, you may have to deal with damage to persons or things within the company for which you work. Suppose while working you throw a cup of coffee over your client's expensive equipment. If this happens during your work as a freelancer, you are not covered by your personal liability insurance and you will have to pay for the damage yourself. To insure you against these kinds of accidents, the company liability insurance (AVB) exists. The AVB covers actual damage to materials or people. It does not pay out if you break something on purpose, nor does it cover damage to your own belongings.
What should you pay attention to?
If you want to take out a BAV or AVB (professional liability insurance), you have a number of providers to choose from. With most insurances you pay per year. However, there is also insurance that you can cancel immediately. Great if you don't have an assignment for a while.
The AVB is a relatively cheap insurance, which you can usually buy for as little as 50 euros. A BAV, on the other hand, is a lot more expensive. The conditions and costs differ by profession. For example, if you are a construction consultant, the insurance company will assess the risk higher than average and you will therefore pay more. Often, the premium also depends on your annual salary or turnover. Roughly speaking, the costs range between 600 to 1,200 euros per calendar year.