The cost of professional indemnity insurance can vary depending on a number of different factors.
In this guide we will run through some of those factors, and look how much professional indemnity cover might cost your business.
Cost Factors
Some of the major factors influencing your professional indemnity insurance cost can include the following:
- Annual turnover/revenue of the business
- Number of staff overall
- Number of qualified and/or professional staff
- Business type & activities undertaken
- Industry or sector which you operate in
- The amount of cover required
Ultimately the insurer will be looking at the potential risk that you pose to them, i.e. how likely you are to make a claim, and how large that claim is likely to be.
We’ll now take a look at some of these factors in more detail.
Annual Turnover / Revenue
One of the easiest ways for the insurance company to assess the size of your business is via the annual revenue generated by your business.
A higher level of turnover generally indicates more work being undertaken, which in turn can lead to more opportunities where a claim may arise.
For this reason, generally a higher level of annual revenue will lead to a higher professional indemnity cost for your business.
Staff Numbers
In addition to using your annual revenue to measure the size of your business, the insurers will also look at the number of staff you have.
Although the total number of staff employed by your business is one factor, generally the insurers are more interested in the number of staff who fill professional and/or qualified roles.
Generally it is the professional staff who are likely to be involved in a professional indemnity insurance claim, so it’s no surprise that the number of these people will impact upon the cost.
Someone operating as a single-person consultancy will virtually always pay less than a company with multiple professional staff.
Business Activities
The type of business activities you undertake can have one of the largest impacts on the insurance premiums charged for professional indemnity.
As with all things insurance this comes down to risk.
If you are working as a marketing consultant the insurance company is generally going to see your business as a lower risk than an accountant or financial planner.
This has nothing to do with how well qualified or professional a marketing consultant may be in comparison with a financial planner, but is more about the likelihood (and size) of a claim being made against you.
Industry / Sector
As is the case with business activities, the insurer and their underwriters will also look at the risk involved in the industry sector you work in.
Whilst it is difficult to generalise in terms of which industries are considered low and high risk, it is fair to say that a company in the mining industry is likely to pay more than someone in the web design industry, simply due to the potential size of the claims which may occur.
Sum Insured
The final factor we will look at is the amount of cover that you or your business requires.
This factor is fairly simple, in that the more cover you require, the higher the cost of the cover.
With professional indemnity insurance available in amounts anywhere from $1 million to $20 million plus, there is a lot of room for movement depending on how much cover you need.
Actual Costs
It’s impossible to give an accurate price on professional indemnity cover without finding out more about the business.
For a sole trader working as a consultant the cost for $1 million cover can be from as low as $300, whilst for a large multinational the premiums can climb into the millions.
The best way to find out the professional indemnity insurance cost for your business is to request a quote from an insurance company or broker.
To request a quote on your business insurance simply click here to be taken to our secure online quote form.
