A professional indemnity insurance policy is decided by five things, and none of them is the premium. The retroactive date, whether the limit is in the aggregate, whether defence costs sit inside it, the notification condition, and the exclusions. Reading those five takes twenty minutes once.
The retroactive date
The date the cover reaches back to. Work done before it is not covered, whenever the claim arrives. When changing insurer, the new policy's retroactive date must reach at least as far back as the old one, or years of past work quietly become uninsured at renewal.
Aggregate and defence costs
An aggregate limit is the most the insurer pays in total for the year rather than per claim, so one claim can consume it. Defence costs inside the limit reduce what is left to settle. Two policies with identical headline limits can differ entirely on these two points.
The notification condition
Almost every wording requires notification of a circumstance that might give rise to a claim, as soon as you become aware of it. That is earlier than a formal claim and earlier than most people notify. Late notification is one of the most common reasons a professional indemnity settlement is reduced.
The exclusions worth reading
Deliberate and dishonest acts. Fines and penalties. Contractual guarantees beyond reasonable skill and care, which catches anybody who signed a fitness for purpose obligation. Work done outside the declared activities. Trading losses of your own business as distinct from a client's loss.
Questions people ask about professional indemnity insurance policy
What is a retroactive date?
The date cover reaches back to. Work done before it is not covered, which is why it must be matched when changing insurer.
Are defence costs inside the limit?
On many wordings yes, which means defending a claim reduces what is left to settle it. Check, because it varies.
When must I notify?
As soon as you are aware of a circumstance that might lead to a claim, not when a claim arrives. Late notification is a common reason for a reduced settlement.