Top 6 Factors that Affect Professional Liability Insurance Cost 

Top 6 Factors that Affect Professional Liability Insurance Cost | The Enterprise World

When figuring out the cost of professional liability insurance, it’s always best to read the fine print. It’s likely you’re fully aware of several factors that go into determining your premium but, have you considered the factors that affect your limits and deductibles?

After all, as we all know, there’s often more to insurance costs than just the premium. 

Today, we’ll be covering the top 6 factors that affect your professional liability insurance costs. 

1. Hours Worked

Most of us work the standard 40 hours a week and earn a base income calculated hourly. But, for some businesses, part-time employees play a big role too.

This is a bit of a wild card because some insurance programs offer part-time policies while others don’t, and this will be reflected in the cost. We recommend you check out small business insurance quotes to get an idea of what this could cost you. If a general policy is available for part-time employees, the premium is based on the location of the insurance firm. 

In most states, employees who work under 1,000 hours annually are considered part-time and can be rated using a part-time premium. 

But, that doesn’t mean that you shouldn’t consider this cost when choosing an insurance firm. We recommend that you speak to your insurance broker about whether they offer part-time policies before signing a contract. 

If you don’t, you could be missing out on some major savings. 

2. The Location

A major factor in determining the cost of your insurance is the state you’re living in and the location of your insurance firm. 

Top 6 Factors that Affect Professional Liability Insurance Cost | The Enterprise World

Individual rates are also determined for each field of practice within each state. Insurance prices might fluctuate year after year as more claims are submitted and the insurance carrier gains a better understanding of the risks connected with the location and area of practice.

This means that the cost of liability insurance will vary depending on the state you’re in. We recommend checking out the average cost of insurers in your area for a better idea of what it could cost you. 

3. The Industry

The cost of professional liability insurance for a business is influenced by the type of industry it operates in. Industries such as healthcare or construction are more likely to face liability claims. This is due to the high-risk nature of their work. 

Other high-risk industries include mining, agriculture, pharmaceuticals, aviation, the food industry, waste management, the chemical industry, and financial services. 

Belonging to one of these industries could lead to you being charged higher premiums. 

On the other hand, industries that are perceived as less risky, like consulting or software development, are less likely to face claims and therefore attract lower premiums. 

4. Insurance Company

The cost of professional liability insurance will also depend on the firm you decide to go with. Different insurers will have different underwriting guidelines, pricing models, and expertise, all of which affect the cost of your quote. 

It is also likely that larger, more established firms will have a higher costing model than smaller, less renowned firms. 

We recommend you do your research and figure out which firms you’d like to approach. Next, obtain quotes from each to find the coverage that best suits your needs and budget. 

5. Types of Services

The larger the insurance firm, the more services they offer. Often, the types of services and the features of these services will also vary depending on the firm. So, it’s likely that two large insurance firms will offer a different suite of services since each firm specializes in different areas of work. 

Top 6 Factors that Affect Professional Liability Insurance Cost | The Enterprise World

It is thus vital that your insurance agent be aware of the complete range of products or services that your company provides. Having a broker that understands the work you do makes it easier for them to recommend the appropriate services to meet your needs

It’s also a good idea to have separate billings for different sorts of services so you can manage budgets more efficiently and your broker can appropriately underwrite risk.

An insurer determines a professional liability insurance premium based on their estimate of the quantity, likelihood, or dangers. An “ambiguity cost” may be added to the premium by an insurer if they believe unknown risks exist or cannot provide a clear service breakdown.

6. Claims History

Claims are another important aspect that influences the potential cost of your insurance plans. While we all hope that we’re never in the position of needing to claim from our insurance, life happens and we have to roll with the punches. 

Top 6 Factors that Affect Professional Liability Insurance Cost | The Enterprise World

When this happens, it’s best that you understand how this claim can affect your premium cost in the future. Insurance companies understand that not all claims are made equal. If you file a claim but nothing is paid out, you can expect little to no change in your premium rise. 

However, if a major claim is filed against your company and the carrier incurs a huge settlement, your insurance rate might skyrocket. In such situations, the insurance company may decide not to renew the firm the following year. 

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