Niche professional liability insurance is an important business expense for anyone offering professional services. Good insurance companies offer policies that pertain to individual niches and take into consideration the challenges of each profession, rather than trying to force a few standard policies to cover a wide range of liability types. One common question insurance agents receive is how premiums are determined. Some of the major determining factors are:
- Industry Risk – Even within a given field, such as medicine, some specialties receive more litigation than others.
- Location of the Business – Some cities and states have a higher occurrence of lawsuits than others.
- Claims History – Statistically, those with a longer history of litigation are more likely to have future problems.
- Liability Risk Management Practices – Proper protocol, training, and procedures limit the threat of litigation by minimizing errors.
- Number of Clients and Years in Practice – The threat of litigation increases with the number of clients because each client represents a chance that someone will file legal proceedings.
- Deductible and Breadth of Coverage – Plans with broad coverage and low deductibles are logically more expensive than plans with average coverage.
Controllable and Non-Controllable Factors
The overall question that niche professional liability insurance companies attempt to answer before they set premiums is the amount of risk involved in covering an individual or company. Many factors are within a professional’s control, such as establishing solid practices to manage liability risk. Others cannot be controlled, such as the frequency of litigation in a given area. A conversation with an insurance agent is the best way to determine how to minimize both risk and premiums.