How Professional Liability Rates Are Determined
While you’re shopping for a Professional Liability Insurance policy, you’ll find many different coverage options with varying degrees of coverage and rates. You’ll also find it’s fairly easy to compare what’s covered—and what’s not—by reviewing the various policies available on the market. But, what’s not as easy to determine is how professional liability rates are determined by insurance companies.
There are a number of factors that go into calculating a policyholder’s insurance premium—many of which are circumstantial and include the following:
- Your profession – The more risk associated with the work you perform, the greater the likelihood that claims of negligence will be filed. As a result, your insurance rates are often higher.
- Potential severity of claims – How costly are claims in a given profession? How serious are the affects of these claims on the claimant? The more severe a claim in dollars and nature of injury, the higher the rates.
- Number of years in the profession – Professionals with more experience statistically have lesser chance of behaving negligently, thus reducing the likelihood of a claim being made against them. Therefore, rates are generally higher for professionals just joining the workforce.
- Employment status – Because professionals working part-time have less time on the job and, therefore, a reduced chance of being named in a negligence claim, premiums are generally lower for them than they are for their full-time counterparts.
- Number of individuals covered by the policy (group policies) – If more than one person is covered under the same policy, group discounts may apply.
- Practice location – Individuals practicing in metropolitan areas may incur higher premiums than those in rural areas.
- Liability claims history – Prior claims filed against an individual weigh heavily in the determination of insurance rates. Just one filed claim (depending on the severity) can result in higher rates, and multiple filed claims can almost guarantee higher rates.
It’s important to understand that, as a consumer, you also have some control over the premium you are charged for your insurance based on the limit option you choose when purchasing coverage:
- Coverage limits – The limits of liability you select have a direct bearing on the premium amount—the higher the coverage limits chosen, the higher the premium will be. The limit choices often vary by state and, in most cases, are offered as a per occurrence limit with an annual aggregate. For example: $1,000,000 per occurrence/$3,000,000 annual aggregate is a common limit of liability. This means that each claim will be covered up to $1,000,000, with $3,000,000 being the maximum amount of coverage provided for all claims filed in one year.
When selecting a Professional Liability Insurance limit, it’s wise to carefully consider the likelihood of a claim and how much it would cost to defend that claim. Simply choosing the lowest limit in order to obtain the lowest premium is generally not the best idea as it may not provide the level of coverage a practitioner in their profession should carry. Check out what Professional Liability limits your peers in the same profession carry. Asking around can be helpful when determining what limits are appropriate.
Thank you so much for your prompt response. Might I add, Veronica was a delight to work with and her professionalism and attention to detail made this an overall pleasurable experience.