Consultants such as accountants, lawyers and financial advisers offer services in exchange for fees. However, during such a transaction, another party might suffer losses or damages be it financially, emotionally or their reputation. In this sense, a legal liability will arise due to the alleged consultant's error of omission or acts of negligence when rendering such a service. Also, failure to provide a service as may have been agreed between a consultant and another party, can form a ground for legal liability. Therefore, such professionals should protect their businesses by taking out a professional indemnity insurance policy that covers costs related to the legal obligation. Here are some useful tips for new consulting firms when buying professional indemnity insurance.
Limit of Indemnity
There is no one-size-fits-all rule when it comes to the limit of indemnity that a policyholder should have. However, the costs can include expenses incurred during the settlement of claims and investigations. Furthermore, in case of an inquiry, inquest or any legal proceeding stemming from issues that are associated with a claim, a policyholder will incur representation costs. You should note that such legal fees can skyrocket to the point of eating into your cover to the detriment of settlements and damages. Therefore, you should shop around for different limits of indemnity by being mindful of the fact that the premiums you pay will not increase if the limit doubles.
Before purchasing a professional indemnity policy, a prospective policyholder has to fill out a proposal form. Honesty is the best policy when it comes to giving information. Any extra material information regarding your business must be furnished to the insurer or broker promptly. Withholding information that might potentially be relevant to both parties, especially on the risks of your business, can be costly in the long run. The information you provide will assist underwriters and insurers in calculating the risk associated with your business entity so that they can offer you the right insurance cover. By withholding information, you run the risk of not covering every aspect of your business.
Deductibles refer to the amount that a prospective policyholder has to pay to the insurer before a claim can be covered. Before your insurance is actualised, you have to pay a certain amount out of pocket. The amount differs from business to business. In some jurisdictions, there is a standard deductible that a particular professional must pay. Note that just like any insurance cover, the cost will reduce if a policyholder assumes responsibility for a more significant percentage of the risk. It implies that you will pay higher premiums when your deductible is lower, and vice-versa.