Professional indemnity insurance can cover your business for claims of negligence, or other professional mistakes. It is essential for protecting your business against both financial and reputational damages. But how much professional indemnity cover do you need?
In this post we will discuss some of the factors to consider that will help you determine how much professional indemnity cover is right for you.
What Happens If You Do Not Have Ethe Right Level of Professional Indemnity Cover?
If you do not have enough cover, then you may face financial or legal troubles should anyone ever make a claim against you. But at the same time, you do not want to spend too much on a level of professional indemnity cover you may not ever need.
Factors that Determine How Much Professional Indemnity Cover You Will Need
- Your business. The higher the value of your contacts, the more professional indemnity cover you will need. While a larger client base can increase the size of claims, it is not necessarily the case that bigger businesses will need more cover than smaller businesses. A solo freelance financial consultant may need more cover than a large team operating in a relatively low-risk industry.
- Your industry. Some industries are riskier than others, which means that the cost of claims can be much higher if something goes wrong. In certain industries, such as healthcare and finance, there may also be regulatory requirements determining the level of professional indemnity cover you need.
- Your risk profile and claims history. Your business’s risk profile can push up the cost of claims. Similarly, a history of claims can increase the value of subsequent claims, which may mean you will need a higher level of professional indemnity cover.
How to Calculate How Much Professional Indemnity Cover You Need
- Perform a thorough risk assessment for your business. Pay particular attention to how your services might affect your clients, and on the sort of financial or reputational losses they could face if something goes wrong.
- Refer to the regulatory requirements for your industry. Do they specify any coverage levels?
- Similarly, check your client contracts. Some may require you to have a certain level of professional indemnity cover in place.
- Research the average costs of claims in your sector, and the average level of professional indemnity cover. Small businesses and independent freelancers may need between £500,000 and £1 million professional indemnity cover. But if you work in the legal or financial services, the stakes for your clients will be much higher, so you will need a lot more cover. Potentially, you may need up to £10 million.
We Can Help You Work Out How Much Professional Indemnity Cover You Need
If you are still not sure how much professional indemnity cover you need, we are here to help.
James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business.
We will take the time to get to know you and your business, so that we can advise you on your specific business insurance and regulatory requirements. We can then help you get the right level of professional indemnity insurance for your business – enough to give you full cover should anything go wrong, but not so much that you end up paying excessively for cover you do not need.
Learn more about our professional risks insurance services.