Professional indemnity insurance is essential for protecting your career or business, but how much cover do you need? Since each profession and role is unique, there’s no direct answer to the question.
Instead, you should assess your own professional requirements in order to decide upon your insurance limit. In order to facilitate this, we’ve listed the questions you should be asking yourself, as well as an explanation of why you should be considering these factors.
1. What do you do?
Every business is different, and it’s important to take that into consideration for your insurance. Evaluate the areas of risk in your own field, and also in your client pool. Do you work for large companies with their own legal department, or small businesses without such resources?
2. How big could a potential claim be?
When you’re considering professional indemnity insurance, it’s essential to consider the scope of your professional projects. When doing so, don’t just consider how much you’re being paid, but the amount it would cost your clients if something went wrong.
How much compensation would be required if one of your projects went wrong and caused a loss? Moreover, it’s important to remember that while you may decide on an amount before undertaking any work, and even specify it in a client contract, a judge may overturn this if it comes before a court.
3. Is there the potential for more than one mistake to be made?
If there is the potential for multiple claims to be made, you require a higher level of insurance cover. After all, if these are combined, you may quickly reach your professional indemnity cover limit. While it’s easy to think ‘what are the chances’, it’s actually more likely to occur than most realise.
For example, if you repeat the same mistake for a client over a lengthy period before either of you realise it is the incorrect procedure, the claim could be substantial.
4. How many people might be impacted by a mistake I make?
If you offer readymade solutions to multiple clients, such as software, materials or standard policies, the potential for claims increases. In this situation, it only takes one mistake in your product to impact dozens of businesses.
If these companies then decide to make a claim, whether as a collective or as individuals, the damages may quickly add up to exceed your professional indemnity limit.
5. How much will it cost to mount a defence?
If a claim is made, you don’t just need to cover the cost of damages, you also need to cover your own legal counsel. In addition, a judge may also decide that you should pay for the claimant’s legal counsel, as well as the damages.
A good lawyer is essential, even if there is no basis to the claims made against you. In fact, a good lawyer is even more important when you’re facing baseless defamation. Taking legal action will help you recover your professional reputation quickly, allowing you to continue with your business.
For more information on how professional indemnity insurance protects your career, contact OBF today. Our team of underwriters would be happy to discuss how your policy can be tailor made for your specific needs.