What Limit of Professional Indemnity Insurance Do I Need?

A frequently asked question by customers seeking insurance information is ‘What limit of Professional Indemnity insurance do I need?’ While this is not straight forward question to answer, there are a few strategic ideas that you can use to make your decision easier.

If you are a member of a professional association, it is always a smart idea to contact the association and check whether or not there is a minimum limit of Professional Indemnity Insurance that you are supposed to maintain to comply with their compliance requirements. The association may also be able to provide guidance on issues like this based on their expertise around your specified industry and their experience with other members. In addition to assistance and direction provided by a professional association, there are other factors to be taken into consideration when choosing an appropriate limit of Professional Indemnity Insurance.

The size of your largest client or contract: While your earnings from a specific contract may appear minimal, the overall size of the contract itself can give a more accurate picture as to the full financial exposures in the event of a total loss.

The potential scope of your advice – how many people are relying on your advice? This is particularly important to consultants or individuals giving any form of financial advice. While you may be providing advice in regards to one financial product, this financial product will have multiple clients. Multiple clients will mean multiple claims and needs to be taken into consideration when selecting an appropriate limit of Professional Indemnity Insurance.

Defence costs- When deciding what limit of Professional Indemnity Insurance will be sufficient, it is important to take into account the costs associated with defending an action. Some policies include the Defence Costs within the limit of Professional Indemnity ; some provide Defence Costs in addition to the limit of Professional Indemnity insurance. You will need to ensure your limit of Professional Indemnity Insurance is enough to encompass both the claim and the costs in defending it.

The nature of a ‘Claims Made Basis’ policy- The very nature of a ‘Claims Made Basis’ policy means you need to consider not only your current professional activities, but also all your past activities. In addition to maintaining a limit equal to all past and current activities, factors such as inflation and an increase in interest rate

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