Determining how much Professional Indemnity Coverage a Business needs

(868 Words)
Professional indemnity coverage can protect a business through litigation that could otherwise prove financially fatal. It is vital for companies to carefully decide how much coverage to purchase. This will be influenced by a number of factors.
Before deciding how much professional indemnity coverage to purchase, a company should understand the protection it provides. Professional indemnity coverage can protect a company from any harm that can occur to clients or customers. This may be purposeful or inadvertent.
Different insurance plans have different coverage. They may protect against harm that occurs because you are negligent. For instance, if an auto shop accidently damages a car because they were not careful, this may fall under the coverage. It can provide support if you make a mistake or error. For instance, if a medical professional performs malpractice by harming someone during surgery, then he or she can be protected.
Professional indemnity coverage can help you if something goes wrong while the service is being provided. This is important for companies that work in the computer field. If there is a loss of information or data, then this may fall under the coverage. It may help you if you infringe on someone else’s intellectual rights. Another large area is breach of duty. You may be compensated if someone sues you because you did not provide what was promised.
What losses could you potentially sustain?
Different companies and industries are more at risk for lawsuits. For instance, doctors in the medical field often get sued for thousands and even millions of dollars. This can occur on incidences that were or were not their fault. Also in certain fields, there are historically many successful lawsuits. There are also industries in which a lot more can go wrong such as the potential for complications in the medical field.
Consider the size of your company. A large company with a lot of money might have more to lose. They may be a target. If you are smaller and provide things of little value, you may be less likely to need a lot of professional indemnity coverage.
Consider the dollar amount of the losses that could occur to a client or customer based on your work. For instance, litigation in the medical field reaches such a high extent because of the tremendous loss that can be incurred by negligent or poor service – pain, a loss of health and even death. If you have a small business that provides items with very little worth and cannot impact customers greatly then you might need less insurance.
It is important to think about any problems that may occur. For instance, consider whether you have a shop that sells small trinkets under $5. You may think that you do not need insurance because of the low cost of the items. However, consider what would happen if someone slipped in your shop.
Certain industries are just more likely to need higher insurance amounts. Companies in areas such as information technology (IT), the legal field, the medical field, transportation, architecture and more are likely to need insurance.
In some industries you may be required to carry a certain amount of insurance. This is to protect you as well as your clients and customers. Be certain to know of any rules, regulations and laws within your industry.
In addition to what might be required by the government, consider what clients or contracts require. In some industries such as IT, some clients will only work with service providers who carry a certain amount of insurance. An IT company can cause a lot of damage if not run correctly, and clients want to know that the money will be there to protect them should a problem occur. Building contractors also often need such insurance to be considered for contracts. Companies should be aware of what is typically required in their industry and be sure to adhere to that.
Of course, how much professional indemnity coverage you can afford makes a huge difference. Professional indemnity coverage can be extremely expensive, and some companies purchase less because they simply do not feel like they can afford it. Of course, they then might be at more risk should expensive litigation develop. It can even make the difference between a company surviving a lawsuit or not. However the premiums can be sky high, and not all companies can afford the coverage that they “should” get.
You can also consider standards within your industry and business size. Some insurance companies offer specific plans for certain industries such as IT. You can look to what companies similar to you carry.
You do not need to make the decision on how much professional indemnity coverage to carry by yourself. There are professionals that can help evaluate your risk and give you suggestions. You may want to get a variety of opinions. Remember to be a wary consumer of information if you request information from an insurance agent who has a stake in how much you purchase.
Professional indemnity coverage can protect your company from litigation from a wide variety of sources. Consider all of the factors to make a wise and informed decision about how much you should purchase.
Resources:
http://smallbusinessinsurancehq.com/professional-indemnity-insurance-explained/
http://allinsuranceinfo.org/liability/who-needs.html
http://www.small-business-guide.com/business-indemnity-insurance.html