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To insure or not to insure?

Business is all about taking risks – a risk-free business is generally a profit-free one too. The decision when it comes to insurance, as the IPA’s Finance Director Tom Lewis explains, is how much risk to take.


Business insurance for professional services falls into three main categories:

  • Combined general insurance covering liabilities for employees, the public, buildings and contents etc
  • Professional Indemnity
  • Employee benefits insurance such as life cover, health cover, critical illness and so on

Each of these categories of insurance is distinct and needs to be thought about differently.

Combined insurance covers the general risks associated with being a business; Professional Indemnity covers the risks associated with giving professional advice and will often be driven at least in part by client requirements so therefore typically falls to CFO to decide.

Employee benefits cover will be mostly an HR decision about what benefits to provide.

The two key decisions in regards to General and PI insurance are the amount of cover and the excess. The most cost-effective PI insurance strategy is to put it in place with a view to claiming only for catastrophic loss, rather than expecting to make a relatively high number of smaller claims.

This means keeping the excess as high as possible and effectively self-insuring for smaller amounts.

The total limit of the PI cover will have an effect on the cost, so negotiating sensible levels with clients at contract stage is key.

For more details and tips on selecting Professional Indemnity insurance please see Jelf Insurance Partnership’s guide.

Last updated 18/11/2014

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