27 August 2020
No matter what your industry, it pays off to be covered with the right insurance. For professionals offering advice or services against a fee, it’s crucial to have professional indemnity insurance in place. It’s an insurance that protects your business in case of legal liability, personal injury or breaches of professional duty. Now that we have established why you need it; you may be wondering how much professional indemnity insurance costs.
Here’s the short answer: the cost of professional indemnity insurance depends on a multitude of factors. Read on to find out the main factors at play when it comes to defining the cost of your professional indemnity insurance.
The nature of your business activities is at the core of the cost of professional indemnity insurance. Think about it like this: the more risks your advice carries, the higher the insurance cost. For example, the services of financial or medical consultants naturally carry more risks than those of a graphic designer.
The size of your business is another major factor in determining the cost of professional indemnity insurance. Aspects that insurance companies will look at include your turnover, scope of your business, how many staff there are and what they do.
Both the size of your clients’ businesses and the number of clients you have affect the cost of insurance. For example, do you work with large companies, councils or government departments? Or, do you mainly offer advice to small businesses and sole traders?
Level of cover
Professional indemnity insurance policies also vary in the level of coverage. For small and medium workplaces, it may vary from $1-20 million. Based on who you work with and what your industry is, you may need a higher level of cover.
Willingness to take risks
The final factor contributing towards the cost of professional indemnity insurance is your how much of a risk you’re willing to take. If you’re willing to take a lower policy limit, then the cost of the insurance will be lower, but you’ll pay more out of pocket if anything happens. While it’s alright to go for a lower cover, it should still be high enough to keep you in business when things go wrong.
So, how much does professional insurance cost?
For most businesses professional indemnity insurance can cost anywhere from $100 to $300 a month. On average, a professional indemnity insurance policy costs $1500 per year. Minimum premiums start at $1,000 and rise depending on the before mentioned factors.
Don’t just look at the price tag, though. You need to make sure that the coverage suits your needs and covers you enough to know that your business is safe in a worst-case scenario. With the help of a knowledgeable insurance broker, you can find the policy that is right for you. If you need more advice on professional indemnity insurance, give the team at Norton & Co a call today.
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