The minimum professional indemnity coverage under the Insurance Distribution Directive is €1.250,000 per claim per year and €1.850,000 per year for all claims. All insurance intermediaries must carry professional liability insurance or an equivalent guarantee. The European Insurance and Occupational Pensions Authority has launched a consultation on proposed amendments to the RTS to adapt the base euro amounts for E&O Insurance cover and the financial capacity of insurance intermediaries under the Directive.
How Much Do You Need?
You’ll need enough to cover potential claims. Factors influencing required coverage include:
- Nature of business
- Size of contracts
- Industry standards and regulations
- Client requirements
However, balance adequate protection with managing unnecessary expense. Some clients may mandate coverage limits before they will work with you.
Industry Specifics and Cost Management
Specific professions like law and medicine require substantial, specialized coverage. Most service businesses have lower risks and can opt for basic, inexpensive policies starting around $20 per month.
To manage costs:
- Check with clients on their coverage requirements.
- Compare costs from multiple insurers.
- Consider claim excess levels to reduce premiums, knowing you’ll pay more out-of-pocket on claims.
Growth and Tailored Policies
As your business grows, tailored policies can cover emerging indemnity risks.
Professional indemnity insurance, often called errors and omissions insurance, covers:
- Negligence claims
- Breach of contract
- Failure to meet standards
- Data loss
- Allegations of poor advice costing clients money
It pays for legal defense and any awarded damages. General liability policies don’t cover these professional services issues.
This insurance is crucial for any industry providing expert services, even for free advice. Adding indemnity clauses to policies transfers liability from the professional to the insurer, though it may increase premiums.