Professional liability insurance is a must for many professionals to ensure them against paying massive fines for malpractice or any professional mistakes, but most professionals do their best to avoid getting malpractice insurance because of its high cost. Several factors go into determining the cost of this insurance, and you can manipulate these factors to help make the insurance cheaper, or at least understand why this insurance is so expensive.
Professional experience is a large consideration. A doctor with one year of experience is considerably riskier to insure when compared to a doctor with nine years of experience. Less experience means the professional is more likely to make a mistake, which can cost the insurance company a lot. Due to this, inexperienced professionals are charged the most, to make up for this potential risk. Waiting until you have more experience can drive down the insurance costs, but at the same time, going uninsured will cost you much more if a bad mistake is made.
The services you provide also factor into professional liability insurance costs. A professional that provides secondary services to clients is often less risky to insure, because the insurance company will have to pay less is a mistake is made. However, if you provide mission-critical or life-saving services, then the risks are much higher for your insurance carrier. In the first case, if you mess up, the client is annoyed but that’s it. In the second case, messing up means a business may collapse or that a patient dies; this leads to much higher payments for the insurance company, and subsequently, for you as well.
Similar to the services category, your common clients will factor into the equation of your professional liability. If you have clients that order moderate amounts of items or services from you, then this will positively affect the insurance price, because the company will not need to pay these people much for a mistake. However, if your clients spend massive amounts of money on average, then one mistake can be a heavy hit to the insurance company, because the client will demand a large sum of money for reparations.
The number of professionals you have working for you, if you own a business are and purchasing insurance for everyone, can affect the liability insurance price. In this case, more professionals equates to a larger payment. This is because more employees means more customers, which equals a higher chance of accidents occurring.
It all comes down to risk. While professionals are not inherently riskier than regular people to insure, the work they do can cause high-priced mistakes. Since the insurance company does not want to lose money, they have to charge you a lot to cover you in case an accident ever does happen.