How Much Does Professional Indemnity Insurance Cost?
In this article, we’ll cover where to find professional indemnity insurance, how much it will cost, and some strategies that could help you save money when shopping for a policy.
Where to look?
If you carry other types of insurance, such as homeowners or a general liability insurance policy, check with your insurance provider. If that company offers a professional liability product, you may be able to buy it at a discounted rate. A disadvantage of this approach is that your provider may offer only one indemnity insurance product. If you don’t like the coverage or the premiums, you’ll be out of luck. If your company doesn’t offer what you need, ask for a referral to another company or an independent agent who might.
The advantage of working locally is that if you have a problem or you need to file a claim, you can easily check in with your agent in person, which can be more difficult with an agent you’ve found through a Web site.
That said, you can find legitimate companies on the Internet that offer professional liability insurance.
Regardless of which company you decide to use, research the company’s background. Ask to see its industry ratings, including a review of its claims payment history.
What does it cost?
The cost of professional liability insurance varies, but considering the current economic climate, you probably won’t think it’s cheap. Premiums generally start at about $1,000. The quotes I received from a number of insurance companies ranged from $1,000 to $1,450 for a standard policy that covered me for $1,000,000 for each claim and up to $2,000,000 per year.
Premiums also vary depending on your revenues, the number of employees in your organization (I have none), your location, the limits and deductibles you choose, and your risk factors. Remember that your costs for insurance are deductible as a business expense, so the out-of-pocket cost isn’t as shocking as it might seem.
Factors Affecting Your Indemnity Insurance Premiums
Your premiums will vary depending on your business. (As a documentation specialist, I seem to be in a fairly low-risk category.) Factors that affect your risk and your premium include the following:
Experience: Several of the applications and quote request forms that I found required much more detail from applicants who’ve been in business for less than three years. Presumably, the less experience you have, the more risk you present.
Types of clients: If you deal with clients who have a lot to lose (e.g., a company that processes a high volume of financial transactions), you’ll have more on the line if they decide you’ve cost them money.
Services provided: If you develop mission-critical software, your risk will be higher than that of someone who provides auxiliary services.
You can reduce the cost of liability insurance in a few ways. First, buy only what you need. Some policies include coverage for the following, while others quote it separately. Make sure you understand what’s included, what’s priced separately, and what you can opt out of:
Property: This covers your equipment and other business property in the event of loss, theft, or damage as simple as a spilled soda on a keyboard.
General liability: This protects you from claims of bodily injury and property damage.
Virus liability: This protects you if a client experiences damage caused by a virus that it claims your solution introduced. This is one of the more optional coverages. For example, I don’t need it as a technical writer—none of the solutions I provide are vehicles for viruses.
Intellectual property coverage: Also known as patent infringement protection, this coverage protects you in the event that a client accuses you of stealing a technology or even an idea.
So to sum up the professional indemnity insurance costs depends on your revenues, the number of employees in your organization, your location, the limits and deductibles you choose, the choice of insurance company, the services you provide, claims history etc.