If you’re shopping around for professional indemnity insurance, the chances are you’re considering two or three quotes.
It’s tempting, but try not to go straight for the cheapest. You get what you pay for and cheap isn’t the same as good value.
Problem is, if you’re not sure what to look for, how do you know what is good value?
Although your quotes might seem similar at first, closer inspection will probably reveal small but significant differences in the cover. To help you make the right decision (and so you get the right cover for your business), we’ve put together a handy guide to explain what’s what.
Ideally this should be specific to what you do rather than generic.
Not every business faces the same risks and dedicated wordings are particularly important if you’re in IT, marketing and media, accountancy, architecture, engineering, surveying or anything medical/therapy related.
An insurer that offers specific cover under specific wordings understands what you do and has a policy to cover it. That makes a big difference; not least when there’s a claim.
Level of cover/indemnity
The maximum amount the insurer will pay for one claim or all claims made against you. Unsurprisingly, it’s the single biggest ‘rating factor’ – more cover equals more premium.
Which level of cover is right for you depends on a lot of things. You can start by thinking about what you do, who you’re doing it for and what it’s worth. Read more about that here.
Any one claim or in the aggregate?
Any one claim (also known as each and every claim): the level of cover applies to each claim made during one policy period. The legal costs associated with a claim are paid in addition to this and to the same level of cover (so, in effect, cover is doubled up). There’s usually no limit to the number of claims you can make.
Aggregate: the level of cover applies to the sum of all accumulated claims made in one policy period, including legal costs. Think of it as a ‘pot’ of money available to fund all aspects of all claims made against you. When it’s gone it’s gone.
In that respect, an any one claim policy offers more protection – there’s no danger of the cover ‘running out’ in the same way an aggregate policy could (although the chances of that happening are pretty slim). It usually costs more as a result.
Geographical and jurisdictional limits
Geographical limits refer to where in the world you can work and jurisdiction (or ‘applicable courts’) refers to the country or regional law your contracts must be subject to for you to be covered.
Limits for both are usually defined as: UK, EU, worldwide excluding USA & Canada, and worldwide. Your quote will have a combination of the two.
Claims made under contracts written under US and Canadian law are usually excluded as standard but can be covered. (Due to the litigious nature of American and Canadian markets, cover in these countries requires bespoke underwriting and can cost quite a bit.)
The amount you pay towards a claim. It’s usually only incurred when the insurer has to pay compensation or damages (and if they use their own legal team to successfully defend you). Generally, a higher excess means a lower premium.
Retro for short. The earliest date from which your work is covered, regardless of the start date of the policy. In other words, the insurer extends cover backwards, beyond the start date of the policy, to pick up claims from work you’ve already done.
Some insurers include retro as standard, some charge extra for it and some won’t offer it at all. It depends on what you do and it’s worth finding out whether your quote includes it.
Don’t be too perturbed if your quote says something like: “Retroactive date – none”. It doesn’t necessarily mean there isn’t any cover; it could be that your insurer has included retro but doesn’t need to specify an effective date for it.
Subcontractors and freelancers
If you engage additional pairs of hands to work on or complete a contract with/for you, you’ll need to make sure that their work is covered too. That should be either through their professional indemnity insurance or through yours.
However, your policy might exclude claims made against you due to your subcontractors’ mistakes
Insurers’ opinion is divided on this. Some will cover particular types of outside help and not others, some will cover all regardless and – depending on the nature and value of the work – some will add clauses to your insurance to cover or exclude claims under certain conditions.
Most professional indemnity insurance policies exclude all claims relating to bodily injury.
Some will include death and bodily injury claims if they arise directly from a breach of your duty of care when performing an insured business activity. Whether you need this cover depends on your occupation – it’s useful for health and safety consultants for example.
Watch out for hidden charges. If you pay monthly is it interest-free? Does your broker or insurer charge to resend documents or make mid-term changes? (We’ve seen ‘admin fees’ as high as £40 just for a change of address.)
What’s the insurer’s stance on paying claims? (Some are helpful and reasonable; some will refuse everything.) How do you find that out?
The wisdom of FSA guidelines means that some insurers and brokers can’t give advice. This is called ‘non-advised sales’ and it means all you get is generic information. For specific and individual help and advice, you’ll need to talk to a firm that operates on an ‘advised sales’ basis. This is a good thing because it usually means you’ll deal with an insurance professional and not a customer service rep in a call centre.
As usual, if you’re not sure, the best thing to do is talk to someone. Professional insurance is all we do so if you’d like help or advice when buying your cover, feel free to drop us a line.