Professional Indemnity Insurance is more widely demanded than ever before
, with professions from Accountants to Zoologists valuing the protection it offers. However, Professional Indemnity Insurance is complex and unlike most other types of insurance so it is important that policyholders understand how their cover works.
When deciding if a policy is suitable for your business consider the following:
Professional Indemnity Insurance is written on a claims made basis. This means that if you need to make a claim there must be a live policy in place and you must claim on that policy, even if the cause of the claim dates back many years when a previous policy or no policy was in place.
Because of the claims made nature of Professional Indemnity Insurance, if you do not maintain cover then you will not be protected if a claim comes out of the woodwork. Therefore if you retire or cease trading you should consider run-off cover that will ensure protection continues. If your business merges then you should ensure that there is continuity of cover.
Again, because Professional Indemnity Insurance is claims made, insurers may not want to expose themselves to the risk of any past mistakes being claimed for. Therefore they may set a retroactive date on the policy and will then not accept any claims that have their root before that date.
Professional Indemnity policies will have a Limit of Indemnity, which is the maximum value that can be claimed. The limit will either be Any One Claim or In The Aggregate. An Any One Claim limit is the maximum that can be claimed per claim/incident but the number of claims that can be made on that policy is unlimited. An In the Aggregate limit is the total amount that can be claimed in a policy year. Therefore the latter version gives far less cover and you risk one large claim leaving you without cover.
These are just some of the peculiarities of Professional Indemnity Insurance. In addition, the actual policy wordings can vary widely between insurers, with some policies offering broad cover whilst others are prohibitively restrictive. Professional Indemnity Insurance can be far from straightforward so before you waste money on the wrong cover speak to an independent broker.