Professional liability insurance protects you against lawsuits and claims for professional negligence, errors, and omissions. This type of insurance indemnifies policy holders against wide-ranging claims that arise as a result of a breach of duty, mistakes, or other omissions while discharging professional duties.
While it is important for the professional liability insurance to be affordable, you need to also consider if a cheap policy can cover the risks that you are exposed to for what you do.
Will the insurance policy cover the risks adequately?
Rising client expectations, the complexity of the bundle of services offered as well as the nature of risks are some of the factors that are contributing to a rise in liability lawsuits across industries. In 2018, $4,031,987,700 was the total settlement amount paid concerning medical professional liability lawsuits, with the average per-person cost being $348,065.
Legal malpractice claims have also seen an increase in the severity of claims. A majority of insurance providers reported claims of $500,000 or more in a survey. About 50 percent of those surveyed had settled a claim of $50 million while one settlement was worth $100 million.
A joint survey by the AIA (American Institute of Architects) and American Council of Engineering Companies revealed that both the severity and frequency of claims in the construction industry are on the rise. The highest claims are witnessed in relation to infrastructure projects and condominium projects.
Construction projects are not only complex but can involve multiple sub-contracts. Construction defects, omission, or delays due to any third-party vendor or contractor can attract a breach of contract or professional liability lawsuit. Changes in the weather, interference from the client, unavailability of materials or labor, and differing site conditions are some unavoidable factors that can lead to project delays.
Architects and engineering firms are also purchasing higher limits, given the frequency and severity of claims. Many architecture firms face a requirement of purchasing a professional liability insurance policy with $5 million to $10 million limits.
Given that out of pocket expenditure to settle claims is an estimated $20 million, it is important to evaluate the cost versus benefits when choosing a professional liability policy.
Here are some tips on saving on professional liability insurance premiums:
Be proactive in managing your risks
The ideal and most obvious method of saving premium costs of professional liability insurance is proactively managing the risks that lead to claims. For instance, medical professionals can reduce the risk of claims by documenting a patient’s visit activity, getting signed consent forms, and following best practices in delivering care. Legal professionals can utilize a diary system to document and manage court dates, meetings, deadlines, statutes of limitations to minimize professional liability claim risk. As per the American Bar Association, close to 29 percent of malpractice claims stem from administrative errors, including missing a deadline or Statute of Limitations.
Keep your claims history clean
The fewer the claims, the lower the premium on a professional liability insurance policy. Every professional liability claim can potentially increase your premium rates. Maintaining a clean record concerning your liability claims history goes hand in hand with proactively managing your risks. To keep your premiums under check, plan and implement strategies, protocols, and practices that help you reduce the risk of lawsuits.
Think about the deductible limit
Deductibles are the amount that you pay before the insurance provider settles the rest of the claim amount. The higher the deductible limit, the lower the premium costs. One way of lowering premiums is to choose a higher deductible limit, particularly if there is a very low chance of facing a lawsuit in your industry or profession. However, opting for higher deductibles defeats the purpose of purchasing a professional liability insurance policy as the out-of-pocket expenses will be very high.
Compare premium rates
Consumers typically compare prices when shopping offline or online to find the best deals. The same approach holds good for professional insurance policy. Various insurance companies offer different professional liability insurance policies with standard inclusions and add-ons. Evaluate and compare the quotes and value adds before determining the best one that suits your business needs.
Think long term
When it comes to saving on insurance costs, many professionals look at short term savings. While this is important, not sacrificing coverage in return for lower premiums is even more important.
A low premium can help you save some money in the short term, but in case of a major claim, you may end up losing much more money than what you managed to save. By comparing quotes from top insurance providers and evaluating the standard and add on coverage offered, you can ensure you buy a product that gives you the best value for money.
Visit bizinsure.com to make an informed decision on buying the most suitable professional liability insurance.