It’s a prudent business decision. Having a policy in place to shield you, and your future, from a damaging lawsuit is a good investment if you’re in a relevant field. But what exactly should you look for in a policy, and how do you select one that fits your needs? Below are some things to look for and consider.
Some professionals are required by law or by their professional organisation to carry a minimum amount of insurance. If you are unsure your Insurance Broker will conduct an extensive review of your overall Liability exposures and be able to advise you. You may also have a Contractual obligation and this also needs investigation.
How much do you have to spend?
This will be determinedby your Business’s Budget. The Market for Professional Risks Insurance is very competitive and premiums will be determined by a number of factors. Many options are available so a comprehensive review is essential because you may end up paying for a cover which does not apply to you. Obviously the more options selected the more extensive the cover which translates into higher premiums.
How much cover do you need?
This is influenced by your profession and/or your Business Operations, the amount of business you do with any one client or the size of your largest contract; and the overall income of your business or practice. In short, it is an extremely variable number.
Most Professional Organisations require a specific amount to comply with Membership criteria. For most Businesses though your maximum exposure is identified during the review and assessment process with your Broker.
How much can you pay out of pocket in the event of a lawsuit?
This question has to do with how much risk you are willing or able to take on. A policy with a lower excess means you have to pay less out of pocket, but it will cost you more in premiums. A policy with a higher excess will be cheaper, but you’ll pay more before your insurance kicks in if you are faced with a lawsuit.
Is your cover defence cost inclusive or exclusive?
If your policy is “defence cost inclusive,” then the amount of cover available to pay off a claim drops by the amount paid for your defence. Let’s say, for example, that you have a cover of $1M, and you’re sued for $1M; you incur $25,000 in expenses for your defence. This means you only have $975,000 of cover left to pay off the suit, making you personally responsible for paying $25,000. If your policy is “defence cost exclusive,” defence costs are paid in addition to the amount of cover. So in our previous example, your insurance would pay the $25,000 in defence costs and the $1M to settle the suit.
Is the excess cost inclusive or exclusive?
If your excess is “cost inclusive,” it applies first to your defence costs, then to any claim. So let’s say that you have an excess of $10,000; and that you’re sued for $1M and incur $25,000 in defence costs. Even if you win the suit and don’t owe the claim of $1M, you’ll have paid your $10,000 excess for defence costs. If your excess is “cost exclusive,” you pay nothing until a claim is owed. So in our example, if you win the suit, you’ll have paid nothing out of pocket at all.
Can I switch Professional Indemnity Insurance companies?
Well, yes, but this may put you at risk. Professional Risk Insurance is a Claims Made Policy Wording. Any new Insurer may not cover an incident that occurred while you were previously insured with another company, and your old insurance company won’t cover you if you’ve cancelled your policy. Specific advice is required before taking any action to ensure continuity of Cover.
Finally, even when you sell the business or decide to retire, it would be wise to keep your insurance. A client or customer can sue years after an incident, even if you have retired and are no longer in business. If you keep your insurance, you keep your protection.
Policies can be specifically tailored to suit each Client’s individual needs and circumstances.
VeriSure are Specialists Risk Advisors.
Our commitment to providing the very best Policy Terms and Conditions at the most competitive Premium together with our professional Claims Advocacy is paramount.
Contact us for an extensive Risk Assessment today.
Knowledge then Security.