What Is the Cost of Professional Indemnity Insurance?
Professional mistakes, claims for damages, legal warnings: These are risks faced by freelancers and the self-employed in all industries, regardless of the countries where they operate. Modern and comprehensive Professional Indemnity covers your back for damage events and protects you from a financial disaster in an emergency. But how much does Professional Indemnity Insurance actually cost? We will tell you!
Professional Indemnity: Covered from Day One
Have you just become self-employed and started your own business? Then it’s high time to think about good insurance. After all, mistakes can happen to any of us – even on the very first day. In the article “Professional Indemnity Insurance: Who Needs It And Who Doesn’t? we have therefore provided a detailed summary of the professional groups for which Professional Indemnity Insurance makes sense.
Cost of Professional Indemnity: These Factors Matter
Generally, the premium for your Professional Indemnity Insurance with exali depends on the following criteria:
- Annual net turnover from the last 12 months
- Whether you’re a founder of a business or a start-up company
- Selected insured sum for Financial Loss Insurance (FLI)
- Selected insured sum for General Liability Insurance (GLI)
- Selection of an add-on module
- Contract term: one year or three years
Profession Is Not a Cost Factor
The industry in which you work is not decisive for the premium amount. Insurance solutions from exali are aimed in particular at freelancers, the self-employed or companies that are active in all aspects of digitisation in the IT and telecommunications sectors (e.g. programmers, software developers, system administrators), media (e.g. copywriters, graphic designers or marketing agencies), consulting ( e.g. management consultants or data protection officers) and also includes other service activities (e.g. virtual assistants and experts).
Price-Performance: What Professional Indemnity Must Cover
If you compare prices from different providers, make sure that the insurance benefits are also comparable. Because not every policy covers all risks. Especially with regard to financial losses ( in other words, purely financial losses), there is often a need to catch up. In practice, financial losses are by far the most common type of loss in digital professions (at exali it is around 93 percent of all damage events) and should therefore be comprehensively insured.
Calculation Examples for the Costs of Professional Indemnity
Since the premiums for Professional Indemnity Insurance depends on a number of factors, it is difficult to give a general price. So we have put together some sample calculations below that deal with the different criteria in order to give you a better overview.
Costs of Professional Indemnity Insurance: IT Service Provider
Let’s take the freelancer Adam as an example. Adam has been self-employed as an IT service provider in Poland for several years and has had sales of between EUR 75,001 and EUR 100,000 in the past twelve months. He now wants to take out Professional Indemnity Insurance.
Start-Up or Founder?
Adam has already been working as a freelancer for a few years, so he does not benefit from the 15 per cent start-up discount that founders and start-ups receive in the first two years of insurance.
How High Should the Insured Sum for Professional Indemnity Be?
When choosing the insured sum, it depends on how large the damage could be that Adam can cause to his client. Generally, the larger the companies you work with, the higher the insured sum should be. Adam’s customers are primarily small and medium-sized companies. He estimates the greatest possible damage at 1.5 million euros and therefore selects this amount as the insured sum.
How High Should the Insured Sum for General Liability Insurance Be?
Since Adam assumes on the basis of his projects that he cannot directly cause any personal injury or property damage through his IT activities, he works from home and rarely has to go out of the office for appointments, he chooses the smallest sum insured for General Liability Insurance, i.e. two million euros. He doesn’t anticipate relevant personal injury or damage to property, but carelessness can happen quickly.
What is the difference between Professional Indemnity and General Liability Insurance? All information about this can be found in the following article: What Is General Liability?
Which Term Should I Choose?
Adam has been in business for years and therefore opts for a three year insurance term (instead of one year). He doesn’t expect any surprises in the next few years and doesn’t feel like worrying about his Professional Indemnity Insurance again next year. So he receives a premium discount of 10 percent.
Calculation example for IT service provider from Poland
First-Party Cyber and Data Risks Insurance (FPC) Add-On
The optionally selectable First-Party Cyber and Data Risks Insurance (FPC) add-on protects your business against the incalculable risks of personal damage caused by cybercrime. These include, for example, hacker attacks, ransomware or D(D)oS attacks. In the event of a successful cyber attack, the insurer assumes the costs for fighting the cyber attack, as well as costs or additional costs to avoid or shorten an interruption to your business as well as the costs for PR and crisis management, specialised lawyers or computer forensic specialists.
Business Risk Cybercrime
Since Adam takes cyber security seriously, he decides to go with the add-on and chooses an insured sum of 100,000 euros. The Professional Indemnity Insurance with the add-on costs him 661.50 euros net per year.
Calculation example for IT service provider from Poland with First-Party Cyber and Data Risks Insurance (FPC) add-on
Costs of Professional Indemnity for a Newly Founded SEO Agency
The second example is Joana who just started her own SEO agency in Portugal. She selects 50,000 euros as the expected turnover and, as the founder of her start-up, receives a 15 percent discount in the first two insured years. Joana selects the smallest possible insured sum of 100,000 euros for Financial Loss Insurance (FLI)
and also the smallest possible insured sum of two million euros for General Liability Insurance (GLI).
Since Joana has just founded her start-up, she would first like to take out Professional Indemnity Insurance for one year. This results in the following calculation example:
Calculation example for SEO agency from Portugal (start-up)
Business Risk Property Damage and Personal Injury
Do you work on-site with customers or do you have your own office? Then you could cause personal injury and property damage in addition to financial losses. Therefore, you should not forgo General Liability Insurance. It doesn’t cost much, but it pays off in day-to-day work. Colloquially, this insurance is often called “slips and trips insurance”. In addition to damage caused by broken porcelain or short circuits due to spilled coffee, it also includes damage to rented property, damage on business trips or due to the professional use of drones for example. You should also take into account that errors in your service can also result in personal injury or property damage. That’s why General Liability Insurance should always be included in good a Professional Indemnity Insurance policy in any case.
Costs Professional Indemnity for Management Consultancy
For the next example, let’s take Enna, who is self-employed as a business consultant in Estonia. Enna’s business has existed for five years and its customers include some large companies. Enna states the turnover for the last 12 months was between 100,001 and 250,000 euros and chooses an insured sum of two million for the Financial Loss Insurance, as well as two million for General Liability Insurance. This results in the following calculation for a contract period of three years:
Calculation example for management consultancy from Estonia
Enna also decides to get the First-Party Cyber and Data Risks Insurance (FPC) add-on and selects 150,000 euros as the insured sum. This changes the calculation example as follows:
Calculation example for management consultancy from Estonia with First-Party Cyber and Data Risks Insurance (FPC) add-on.
Since December 2014, Estonia has offered foreigners the opportunity to immigrate virtually. We have summarised the advantages of this and how it works for you in this article: eResidency: The Advantages Of a Virtual Residence For Freelancers
Professional Indemnity for Virtual Assistants
David works part-time as a virtual assistant. His clients are mostly German companies, but he himself lives and works in Prague - so his headquarters are in the Czech Republic. David states that the expected annual turnover is less than 25,000 euros; since he has just started his own business he also receives a 15 percent discount. With the smallest possible insured sum for Financial Loss of 100,000 euros and General and Personal Liability of two million euros, this results in the following premium for a three-year contract:
Calculation example for virtual assistants from the Czech Republic (start-up)
How Much Does Professional Indemnity Insurance Cost for your Business?
Want to know how much your Professional Indemnity Insurance through exali.com costs? With the online calculator, you can put together the ideal insurance coverage for your business in just a few clicks in five minutes. Simply select the country in which your headquarters are located, enter your (expected) annual turnover and decide whether you want to protect your business against the consequences of personal damage caused by cybercrime with the add-on. You are also welcome to contact our customer advisors and get personal advice. You can always reach our customer advisors from Monday to Friday from 9 a.m. to 6 p.m. on +49 (0) 821 / 80 99 46 – 0 (CET).
With over 10 years of professional experience in online marketing at various platforms and online stores, project manager Kathrin Bayer provides valuable tips that go beyond current trends.
When she writes articles for exali, they mostly revolve around SEO or SEA risks, e-commerce and online trade or the media industry. She is on fire for all online marketing areas, combining experience with curiosity.