What limit of indemnity should I buy?

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When deciding on the correct cover limit for your business there are a few areas you should think about. As an experienced Professional Indemnity Insurance Broker, we recommend you take the time to carefully consider your client base and calculate the size of your largest business contract value along with your level of responsibility on the projects you work on - basically how much could the maximum claim be should the worst happen!

 

In addition you must make sure the limit of indemnity meets your regulatory bodies' requirements and / or what is stipulated within your clients’ contracts.

 

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            What is a retroactive date?

 

The retroactive date sets out how long before the inception of the current policy that you will be covered for negligent acts, errors or omissions. Professional indemnity is written on a 'claims made' basis which means you are covered for claims brought against you during the policy period. For example, if your retroactive date is 01.01.2016 and a claim is made against you during the 2022 - 2023 policy year for work carried out in 2017, you would be covered for this past work.

 

If your retroactive date is stated as 'none', this is the widest form of cover as it effectively means that all past work is covered.

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            What is the difference between 'any one claim' and 'aggregate' limit of indemnity?

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This relates to the level of cover you have and how much money your insurer will pay out in the event of a claim. If you have a £1,000,000 limit of indemnity in the aggregate, this is the maximum amount which your insurer will ever pay for all claims made against you during the policy period. If you exceed this limit, you will have to pay the remainder.

 

If the basis of the limit is any one claim then regardless of how many claims you make, you have a £1,000,000 limit of indemnity per claim. As you can see, any one claim will give you more protection and there is far less chance of running out of insurance.

 

 

            What is meant by costs including and costs in addition on a policy?

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This refers to the legal costs included in your professional indemnity policy cover. Whilst actual professional negligence claims do happen, it is more common for a business to be accused of an error and an insurance policy being required to simply pay for the defence of such a claim.

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Including defence costs means legal costs are included in the overall level of cover - so if your policy limit is £1million, and a claim costs £100,000 to investigate and defend, there's £900,000 left to compensate a claim.

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Costs in addition means the legal defence costs are separate from the costs of any claim being paid out.. Effectively they are paid on top of, and not out of, the overall level of cover - so if your policy limit is £1million as above, the £100,000 costs to investigate and defend don't eat into the overall level of cover and there's still £1 million left to compensate the claim.

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A costs in addition policy is often more expensive but you must consider when taking out cover how much it may cost to defend a claim. Lawyers and professionals involved in the defence process can be very expensive!

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TO NOTE -  A policy excess can also be 'costs inclusive' or 'costs in addition' too. A costs inclusive excess is paid by your business if your insurer need to investigate or defend a claim against you, regardless of the outcome. A costs in addition excess is only paid when you're at fault so unlike a costs inclusive excess, a costs in addition excess means if your claim is defended it won't cost you anything. As above an in addition excess if often more expensive.

 

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            What do insurers look at when quoting on my professional indemnity insurance?

 

As a highly experienced Professional Indemnity Insurance Broker, we have an in depth understanding of what insurers consider when quoting for an indemnity insurance policy.  When assessing the proposal form and calculating the premium insurers will look at a number of different factors. This could include:

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• Areas of practice i.e. low or high risk 

• Claims history 

• Experience/qualifications 

• Fee income

• Types of contracts you are involved in - this includes the total contract value as well as your own fees

• Risk management procedures

 

To get the most competitive terms from insurers, it is important to complete a full proposal as accurately and as easy to read as possible. Additional information with full details of your experience, the services you offer your clients and the procedures you have in place to mitigate your risk will also help your broker negotiate the most competitive premium on your behalf.

 

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            Can I increase the limit of indemnity during the policy period?

 

Yes. You can increase the limit any time during the course of your policy. You will just need to let us know the limit you require and the reason you why you would like to increase it.

 

If your current insurer doesn't wish to increase their risk exposure within your business, and therefore will not offer a higher limit, we can approach other insurers who can offer an 'excess of loss' policy. This policy will likely mirror your primary insurers terms and make up the additional cover you require. 

 

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            Can I get Professional Indemnity if I am new start up business?

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Yes. As well as completing a proposal form, insurers will also want to see a copy of all directors CVs detailing their experience in the relevant field of business, a business plan and financial forecasts.