Understanding how insurance industry accounting works will help organizations in any field make important decisions such as the kind of cover they need or how to make a claim in a given circumstance.
For a better understanding about professional indemnity insurance, we broke down the four most important things that every company and their accountants should be aware of:
No matter what type of business you have, you still need insurance
A common misunderstanding is that only companies in the medical and legal fields need insurance. Even though companies in some specific fields need a certain kind of insurance, businesses that give advice, handle client data, or deal with intellectual property need to have special interest in this matter. Professional insurance can cover for things like negligence, unintentionally breaching copyright or for losing client documents.
Mistakes happen and it’s better to be prepared
It is important to understand that no matter how professional and experienced your business is, mistakes happen every day. Whether it was your company’s fault or you are being accused for a mistake you didn’t make, the cost of defending yourself against a compensation claim could be really high. This is where a good professional indemnity policy really comes into its own: it can cover legal costs as well as compensation claims, up to the limit of your policy.
A small amount of cover is not always enough
Saving money might seem like a good idea when getting insurance. However, a small amount of cover is sometimes not enough when the company is involved in an unpleasant situation. A good way to estimate how much cover you will need, is evaluating the clients you work with and possible damage.
For example, if you are an architect and work on high-value construction projects, a mistake could cause severe damage and a lot of money, so you might want to consider a high amount of coverage.
Buying insurance is easier than most think
Nowadays, there are many easy options for buying insurance. For those who don’t have time, most companies offer online services that can give a very accurate estimate of how much the company will have to spend. When getting a quote, it is important for companies to provide detailed information that will make the process easier and will determine the rate.