Financial loss liability insurance

Financial losses that occur in the course of professional activity must generally be borne by the entrepreneur or self-employed person themselves. This means that these professional groups carry a high level of personal liability risk, but they can protect themselves against such claims by taking out financial loss liability insurance.

Why it matters

In professional practice, even a small mistake can lead to significant financial damage, for which the self-employed person or business owner may be held liable. Therefore, taking out this type of insurance is essential for many professions.

Whenever an entrepreneur or freelancer is responsible for financial or advisory duties of care, an error can result in a loss that threatens their financial existence — and, in severe cases, can even lead to bankruptcy.

Professions with particularly high risks for financial loss include:

• Doctors

• Architects

• Tax consultants

• Lawyers

However, such risks can also arise in voluntary or honorary activities, where a mistaken decision can similarly cause financial harm.

Coverage

If a financial loss occurs, the insurance covers legitimate liability claims up to the agreed coverage amount. However, the insurer only pays for claims that are justified. Therefore, most financial loss liability policies also include a passive legal protection function, meaning that the insurer will defend you against unjustified claims at its own expense.