One of the key questions that comes to mind when organising your various insurance covers is how much do you need. When it comes to professional indemnity insurance it is prudent to take out cover whatever your business does but knowing the level you require is a little more difficult to ascertain. Some insurances like buildings or office have set calculations you can make when organising your cover but for professional indemnity insurance it’s a little trickier. There is no one-size-fits-all solution as every business is entirely unique and so you may need to take some time before deciding on the cover amount you need.
Your professional indemnity insurance will cover you if a client should bring a case against you and you need to cover the costs of any pay out required as well as your legal costs. It’s also in place to protect you for similar third party claims.
Any business that provides advice, a service or consultancy should invest in professional indemnity insurance. Some professions make it easy to define a minimum cover amount as there are recommendations by industry organisations but it isn’t that simple for every sector. If you are working out your cover yourself take into account, these three key determiners:
- The size of the contract you’re working on and the client it is for
- The maximum compensation that could be awarded to you which you can estimate by working from your project fee and multiplying it a reasonable number of times
- Potential costs if you need to defend yourself legally
It is very hard to think about a scenario where your clients are so unhappy they would want to sue you, but it is essential to ensure you have the right cover.
You may need to take advice to get the level of cover you require and if you have a shortlist of potential insurers you can get in touch with them directly for advice. The figures may vary widely dependent on the value of your contracts, the size of your clients and the legal fees which you may occur. Whilst you cannot know exactly what any case could cost, you can ensure you have a good level of cover so you have peace of mind should the worst happen.
Insurance is all about giving you protection in the worst business scenarios and whilst no one wants to have to make a claim on their insurance, you’re in a much worse position without any cover.