Have you been told that as a service provider or consultant, it would be a good idea to buy professional indemnity insurance? Well, you heard right!
In an increasingly litigious world, holding professional indemnity insurance as a service provider has become necessary. Why? Because it can help you manage risk if you’re ever held liable for being negligent when delivering your services or advising clients. The key is finding the best cover for your business to protect your company, assets, and reputation.
But how can professional indemnity insurance help you manage risk? And how do you choose professional indemnity insurance tailored to your business needs? That’s what we’ll discuss in this article.
How to manage risk with professional insurance?
Professional indemnity insurance (PI insurance) is a type of liability insurance designed to protect companies from financial losses if they are held responsible for providing inadequate or negligent professional services or advice. More specifically, PI insurance can cover costs such as legal fees, compensations awarded to clients, and any other expenses related to a claim. But how does professional indemnity insurance help you manage risk?
While you’re doing your best to deliver top-notch services to every customer, mistakes happen. You could deliver a faulty solution to one of your clients or inadvertently give them the wrong advice. And this could lead to significant financial losses for them. PI insurance can help your business manage risk by providing a safety net against such unforeseen events and protect your financial assets and business reputation.
Now, let’s move on to our five tips on how to choose a professional indemnity insurance policy tailored to your business needs.
Consider your specific risks
The first thing you’ll need to do when looking for Professional Indemnity insurance is defining the specific risks inherent to your business and industry. These risks will depend on your contractual obligations, the type of services you provide, the size of your business, and the number of clients you have. For instance, if you’re a personal trainer providing one-on-one coaching sessions to five clients under 35, your risks might be lower than if you’re a financial advisor advising hundreds of wealthy clients a month.
Define the level of cover
You’ve done your research and believe you’ve found the perfect policy for your business. Now, it’s time to choose the level of cover. As mentioned before, some professions are legally required to hold professional indemnity insurance, and the regulation will also stipulate the amount of coverage required for the individual to be able to practice (this is usually determined based on the level of risk).
However, if you’re not required to hold a minimum level of indemnity coverage, we’d recommend carefully considering your options. While it can be tempting to opt for the cheapest option, you also need to consider the potential cost of a claim if you were ever held liable for negligence, omission, or breach of professional duty.
The right cover will strike the right balance between cost and level of protection based on your risk exposure.
Look at the exclusions
Reading the fine print is always important! Sure, you’re super busy, and you’ve just found a policy that seems to cover the most important claims you could be facing. So, why not jump right in? Well, before doing so, have you looked at what the policy doesn’t cover? Unless you’re an insurance expert, you might have overseen some types of claims that could be raised against your business and aren’t covered by the policy you’re considering. And it would be a shame to have done all of this groundwork and pay insurance every month or year only to find out that you’re not covered for a specific claim to which you knew you could be exposed.
Now, every policy has exclusions. After all, insurance companies’ goal is to make money, and therefore they can’t take on all the risks. However, what we’d recommend is that you carefully look at these exclusions and ensure they don’t leave you exposed to claims you might very well face.
To help you make a more informed decision, here’s a list of common professional exclusions:
- Intentional wrongdoing
- Criminal acts
- Claims arising from a prior known circumstance or existing problem
- Contractual liability not related to the professional services delivered
- Employment-related claims, including harassment or discrimination
- Punitive damages
- Claims related to cyber liability
- Refund of professional fees and trading debts
Consider the experience of the insurer
Even though you might assume all insurance companies are created equal, the reality is quite different. Not only is it important to choose an established and reliable insurer, but it’s also important to ensure this particular company has experience with businesses operating in your industry. This will make the process much easier if a claim is ever made against you. That’s because the team will be well-versed in dealing with the type of claims raised against your business and will be able to provide the best support possible. For instance, they may have established relationships with industry experts, which can turn out to be extremely valuable in the event of a claim. Besides, insurers with experience in your area of work might offer policies tailored to your needs as they’re well aware of the specific risks you are exposed to. And this, in turn, allows you to have the best professional indemnity insurance possible.
Finally, the team will most likely be very familiar with the laws and regulations that apply to your industry, which can help ensure compliance and prevent any potential legal issues.
Choosing an insurance company with industry-specific expertise will ensure that your coverage is comprehensive and your insurer can provide the support you need to protect your business.
Ask an insurance expert
Now, when it comes to finding the best cover possible for your business, the best advice we can give you is to discuss your situation and needs with your insurer. Insurers know the ins and outs of the world of insurance and will be able to advise you based on your specific needs.
As a small business owner or independent contractor, your reputation is everything. That’s why it’s crucial to have the right insurance coverage to protect your business and assets from unforeseen risks. At upcover, we’ve made it our mission to partner with market-leading companies that provide tailored policies for small business owners and independent contractors.
Our user-friendly online platform is designed to allow you to receive quotes within seconds and insure your business within minutes. Whether you need more tips on how to choose professional indemnity insurance or simply want information on how we can help protect your business, don’t hesitate to get in touch.
We’d be happy to assist you!
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