Obtaining professional indemnity insurance cover is necessary for legal firms. However, the firms do consider the premiums and costs as one significant expense. While some lawyers and solicitors consider professional indemnity insurance an unwelcome cost, it can be a lifesaver when things turn awry.
When opting for professional indemnity insurance, you must understand the type of benefits and coverages that your preferred insurer is offering. The premiums of Solicitors Indemnity Insurance may vary from company to company, and hence a comparison of insurance quotes must be done in order to ensure the right choice.
How does the solicitor’s professional indemnity insurance work?
Solicitors’ professional indemnity insurance offers financial security and coverage to firms when they require it most while ensuring the public interest protection for civil liability claims. The solicitor’s PI insurance would provide you with financial protection when a third party or a client makes allegations against you for breach of trust, negligence or defamation. The claims arise out of situations where solicitors get sued by the client or a third party for the provided legal services. These losses can be huge and you must cover these with adequate insurance coverage.
Key determiners of the premium of solicitor’s professional indemnity insurance policies :
Here are some key factors which can affect the cost of solicitors’ professional indemnity insurance. The below factors may even jeopardise the company’s ability to get professional indemnity protection in the future.
1. Area of Practice
A lawyer’s area of practice can affect the cost of solicitors’ professional indemnity insurance cost and may even dissuade some insurers to offer the policy. Some of the high risks of areas include personal injury, conveyancing, wills and probate.
Usually, conveyancing is mainly scrutinised by insurance companies. As conveyancing can continue to go for years, it can certainly increase the cost of solicitors’ professional indemnity insurance. To avoid cash flow struggles, it is essential for solicitors to approach a specialised professional indemnity provider who can help them secure the right insurance policy. Nowadays, many insurance companies also offer a long-term policy which allows companies to get additional peace of mind for a longer duration.
2. Claim History
Before issuing solicitors’ professional indemnity insurance, the insurer will evaluate the lawyer’s claim records for the past five or ten years to assess the barometer for future incidents. Here the size and frequency of previous claims would be taken into account, and thus, it will have a major impact on the premium. It means, if you’ve had the claim history in the past five or six years, then your choice of insurers would be limited. Also, the cost of professional indemnity insurance will be high.
To reduce the possibility of being refused the insurance cover on the basis of claim history, it is necessary for the solicitors to keep track of their claim history. As well as documenting what happened and why it is also necessary to list down procedures which solicitors have put in place to curtail the chances of recurrence of the event.
3. Deductible Amount
In the insurance field, the deductible is the amount that the policyholder needs to pay first before the insurer settles the remaining amount. By opting for the high deductible limit, the law firm can cut its premium costs. However, it also means that at the time of claim settlement, the law firm would have to pay a substantial portion of the claim from its pocket before the insurer settles the remaining claim amount.
4. Practice Hours
Full-time versus part-time lawyers are an essential factor which decides the premium of your policy. Most insurers offer a significant premium discount to those lawyers who work part-time or have limited working hours. If a full-time lawyer is thinking to curtail their premium cost, they should approach their insurer to discuss its impact on their insurance policy.
5. Type of policy opted; Claims Made Vs. Occurrence
Usually, most professional liability insurance policies belong to one of the following variants:
The occurrence policies feature defined effective dates and will cover all those claims which occur during the coverage tenure. This is regardless of when the insured intimates the insurer about the claim. Conversely, claims-made policies offer coverage for those claims as well which occur after the retroactive date of the insurance policy, irrespective of what the effective dates of the policy are. Usually, claims-made policies are costlier than occurrence policies. It means you would have to pay an extra premium if you opt for claims-made insurance policies.
6. Policy Limit
Professional indemnity insurance issues policies as per the limits requested by law firms. The amount per claim will directly impact the premium. How much coverage you opt for under a professional indemnity insurance policy would help in deciding the premium rates. The more extensive your coverage is, high will be your premium.
The factors listed above clearly show that there are many features which can have an impact on the annual premium of a lawyer’s professional indemnity insurance policy. Although it may sound exciting to save money by trimming the coverage, it is only advisable after knowing its after-effects.
You should consider the above-mentioned factors while making a decision of purchasing the indemnity policy. For understanding further or to get a personalized risk assessment done for your firm, you may visit SecureNow and experience industry-best assistance delivered at your fingertips.