Professional Indemnity Insurance is one of those things that is necessary but can be very costly. If you are business owner it is a necessity to have this type of insurance because it helps protect you from legal claims against the company for things such as negligence. However if you do not understand how insurers work out how much insurance you are entitled to, you will find it harder to understand why you are being quoted the premiums they quote you.
The majority of insurers will base their assessment of your business’s insurance needs on a proposal form that looks into different aspects of you as the owner and your actual business. The common aspects looked at include the following:
The Type Of Company You Run
The premiums an insurer offers you for PI insurance for your business will depend on what type of company you run. It is common practice that the insurer will ask you to provide a fully detailed description of what your business does. This information will help the insurance underwriter to review the risks involved in your company’s work and also the risks within the actual industry.
Experience In Your Industry
To enable the prospective insurers to build a fuller and more detailed image of you, they will ask you about your experience within the industry that your company operates. This experience is usually proved by the amount of years you have worked within a particular sector, though this is obviously subjective, and any official qualifications you have connected to your company’s lines of work. Insurers will usually see companies and business owners who have large amounts of experience as being low risk customers.
The Risk Factors
The underwriter will denote risk factors to your company’s industry. These risk factors are different for every company and industry. As the majority of insurance underwriters work with hundreds of different companies within many different sectors it is very likely that they will have a reasonably good idea of the different risk factors involved in your company’s industry.
The Size Of The Contract
The premiums and other details of your company’s PI insurance policy can also be affected by the size of contract. Generally, the bigger the size of your company’s contract, the greater and more complex the risks involved, which means there is a larger amount of money involved in any claims against your company. This means that problems are much harder to resolve and require much larger pay-outs. The bottom line is that if your company deals with large contracts, this will be reflected in the amount you have to pay in insurance premiums.
If some of your company’s work is carried out overseas, the insurer will obviously need a detailed explanation of what this work is and what it entails. The reason for this is that when your company’s work involves dealing with overseas clients it can make things that bit more complicated and therefore the insurer has to assess the type of work being carried out overseas and the legality of the contracts for that work. As the laws can be very complex, underwriters will always pay very close attention to contracts with clients in both Canada and the USA.
When you take out a new Professional Indemnity Insurance policy your insurer will have need to understand properly any work that your company has taken on and completed that could be included in a “Retroactive” section of your insurance policy. The majority of insurers will have a retroactive date on their policies to outline work that you have completed in the past that would be covered by your PI insurance. It is important that you remember that any work that your company has undertaken and completed beyond the retroactive date, will not be covered by your PI policy.
For more information on professional indemnity insurance or to get a quote visit the PI Expert website today.