How Much Does Professional Indemnity Insurance Cost?

How much does Professional Indemnity Insurance cost?

On average, small business owners can expect to pay around $112.28 per month for Professional Indemnity insurance.

We have analysed data from 500 businesses across New Zealand who took out a stand-alone Professional Indemnity insurance policy through BizCover in 2017. The sample includes businesses across many different industries, however all have 20 or fewer employees.

As you can see from the below graph though, over a third only pay between $45 and $74 per month.

The cost of Professional Indemnity insurance depends on a number of key factors including:

• The type of business you operate – the riskier the industry or business, the higher the premium is likely to be
• Your business size and turnover
• The amount of insurance cover you require
• The individuals being covered – are they qualified for the job they are performing
• Previous claims history

Traditionally, Professional Indemnity, also known as PI insurance, was generally only required for occupations such as doctors, lawyers and accountants, however these days most businesses that provide a professional service or give advice require it to protect against legal costs and claims for damages that may arise from a breach of professional duty.

The quickest and easiest way to find out how much a policy would cost for your business is to simply click on the button below to compare quotes.

What is the average cost of Professional Indemnity insurance by industry?

Occupation type is one of the biggest determining influences on pricing of Professional Indemnity insurance policies. The higher the associated risk of service or advice you provide, or the higher a potential claim could end up costing, the higher the insurance premium will most likely be.

As you can see from the below graph, Real Estate Agents and Engineering consultants pay a much higher premium than, say, Multi-media and Marketing consultants or Bookkeepers. This is because Real Estate Agents and Engineers are more likely to have a claim for negligence brought about them, and the potential value of such claims is also much higher than other types of occupations. For example, imagine the losses that might occur if an engineer made an error in the design of a bridge and it subsequently collapsed, or a Real Estate Agent failed to disclose a significant defect in a multi-million property they sold.

It is important to note, however, that each insurer has their own preferred occupations. What one insurer may consider a high risk occupation may not be considered as high risk by the next, which is why it’s important to shop around and compare quotes before purchasing a policy.

*Data based on New Zealand BizCover customers

Does the size of my business affect the premium?

Size really does matter – when looking at the cost of Professional Indemnity insurance at least.

Two factors that determine the size of a business are the number of people the business employs and the amount of turnover it generates. Looking at the graphs below, both do affect the cost of the premium, however the amount of revenue generated has a greater influence.

A high turnover is an indication that you do a greater volume of work, and the more work you do, the greater the chance of something going wrong and a claim being made against you. A larger turnover could also indicate that you take on high value contracts which would mean expensive settlements if things don’t go to plan.

*Data based on New Zealand BizCover customers

* As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording.  The information contained on this web page is general only and should not be relied upon as advice.