6 Things to Compare in Your Professional Liability Insurance Quotes

You're ready to buy small business insurance, so your broker emails you Professional Liability Insurance quotes. Now you've got to decide between different policies. How do you know you're getting the right coverage?

That's the situation many IT business owners face. Price is the typically the first concern. You want affordable coverage. But that’s not the only consideration.

If you're paying for this policy (also sometimes called “Professional Indemnity Insurance”), you’ll want to make sure you're getting adequate coverage that can actually protect you from the cost of a lawsuit. To do that, check these six things.

Professional Liability Insurance Quote Tip 1: Check the Carrier Rating

Insurance companies are rated on how financially secure they are. These ratings are done by A.M. Best. The top companies have “A” ratings.

Why is it important to check an insurance company’s rating? Insurance companies with good ratings are more financially secure. They're not going anywhere. If you need to file a claim, an A-rated carrier will be around to handle it. Low-rated insurance companies are more likely to go bankrupt, close up shop, or not have the money to cover your claim.

Professional Liability Insurance Quote Tip 2: Know the Sublimits of your Coverage

A typical Professional Liability Insurance policy for an IT contractor has $1 million in aggregate coverage, but a sublimit may cap the amount of coverage you can use for certain parts of a claim.

For instance, you may have a sublimit that says only 10 percent of your coverage can pay for punitive damages (i.e. only $100,000 of a $1 million policy).

Being aware of which policies have a sublimit can help ensure you're getting the most coverage for your money.

Professional Liability Insurance Quote Tip 3: Compare Payment Options

Some Professional Indemnity Insurance policies require you to pay your annual premium up front. Others will let you pay it in two or three chunks throughout the year.

As a small-business owner, you know that cash flow is one of the biggest challenges you face. Some contractors may not have the cash to pay for all their insurance costs at once. Check your payment options to make sure you've got a policy that fits with your cash-flow needs.

If you miss a payment, you may experience a gap in coverage.

Professional Liability Insurance Quote Tip 4: Check Deductibles

As with health insurance, a Professional Liability Insurance policy has a deductible – the amount you'll have to pay before an insurer covers your claim.

For smaller tech companies, a Professional Liability deductible may range between $2,500 and $5,000. Generally speaking, lower deductible policies are more expensive, but you’ll have to pay a smaller share of any claim. You'll have to weigh deductible differences when you choose a policy.

Professional Liability Insurance Quote Tip 5: Get “Duty to Defend” Coverage

Policies are typically either "right to defend" or "duty to defend." And "duty to defend" is better.

If a policy states that the insurance company has the "right to defend" your business, that means that the carrier can defend your business from a lawsuit, but it doesn't have the obligation to do so.

"Duty to defend" is the opposite. It means that the carrier has the obligation to defend you as long as your claim meets the conditions outlined in your policy.

For stronger coverage, check to make sure that your Professional Liability policy contains "duty to defend" conditions.

Professional Liability Insurance Quote Tip 6: Be Aware of any Cancellation Penalty

Some Professional Liability Insurance will come with a 10-percent cancellation fee, sometimes called a “short rate” penalty. Be sure to note this. If your policy has a 10-percent cancellation fee, you’ll have to pay 10 percent extra on any unpaid premiums. Here’s how it works.

Say you cancel your coverage but still owe $500 in premiums. In addition to paying the $500, you’ll owe another $50 dollars (10 percent of the unpaid premium) as a cancellation penalty.

More Information about the Cost of Professional Liability Insurance

We've talked about what you should check in your insurance quote, but we haven't covered the cost of Professional Liability Insurance. Quotes vary from business to business, but you can check out our sample Professional Liability Insurance quotes for IT businesses. These quotes show the typical cost of business insurance for various types of tech businesses.