A professional indemnity insurance plays a crucial role by offering you financial coverage against professional negligence and errors. Within the field of risk management, buying a professional indemnity insurance (also called errors & omissions insurance policy) is a crucial step which you can take towards hedging your potential risks.
If you are in the market looking for professional indemnity insurance, you will be amazed to find that the insurer considers various factors to decide your insurance premium. Let’s have a look at those factors:
1.Profession: The more risks associated with the work you do, the higher would be the likelihood that negligence claims would be filed. As a result, your premium of your errors & omissions insurance policy would be high.
2.Territory: Professional indemnity insurance companies decide premium on the basis of specific territories as well, in response to change in litigation costs associated with different locations over the period. It means professionals having their business in metropolitan cities may have to pay hefty premiums as compared to those who work in rural areas.
Here it is important to note that many times professionals change their locations and add a location without informing their errors & omissions insurance company. Not only, does it raise the liability but there could be a change in premiums with a change in the territory as well. Due to this reason, it is essential to report any change in location as soon as possible.
3.Potential Severity of Claims: How much seriously a claim can affect you financially? The costlier the possibility of claims and nature of the injury, the higher would be the premium rates.
4.Number of Years in The Profession: Those professionals who have years of experience in their field usually have lower chances of behaving negligently, thus, reducing the likelihood of claims being filed against them. It means premium rates would be higher if you are a newbie in your profession.
5.Employment Status: Because professionals who work part-time spend less time on their job, there are lower chances of claims being filed against them. As a result, part-time professionals pay a lesser premium as compared to their counterparts who work full-time.
6.Group or individual policy: If there is more than one person covered under professional indemnity insurance policy, group discounts may apply, and as a result, premiums could be low.
7.Claim History: The prior claims filed against a professional play a crucial role in deciding the premium rates. A single filed claim (depending on the severity) can translate into higher premiums. In case of multiple claims in the previous year (s), there could be guaranteed increase in the premium rates.
8.Claims-Made Vs. Occurrence: Errors & omissions insurance policy is usually of two types: claims-made or occurrence. Occurrence policies have defined the effective dates, and thus, they cover only those claims which arise during the coverage tenure, irrespective of the fact when the claim is reported. Conversely, claims-made policies cover those claims which are made against the policyholder during the policy tenure, regardless of when the wrongful act that gave rise to claim actually took place. As claims-made policies are costlier than occurrence policies, you would have to pay more premium as per the policy type you choose.
9.Deductible: In the insurance world, the deductible is the amount that the policyholder has to pay at the time of claim before the insurer covers any claim amount. A high deductible limit means that the policyholder would have to pay more amount at the time of claim. By raising the deductible limit, the policyholder can trim premium rates.
The above-listed factors play a crucial role in deciding your premium under professional indemnity insurance policy. Although, you might get tempted to save money by changing your policy coverage terms, however, stay away from doing so unless you discuss the same with your insurance broker. The experts at SecureNow are qualified to carefully review your policy document and help you save money without curtailing the coverage.
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