Professional indemnity covers you for mistakes made during the conduct of your business. Small mistakes could potentially incur large losses as a result of an omission/ error/ misrepresentation of fact or material advice. Dispensory of wrong advice could cause financial loss to your client, and if your client were to pursue a legal suit to recover this loss, the financial impact of fighting a legal battle & its defence cost can bear down greatly on the financial standing of the defendent & its business.
The need to purchase Professional indemnity greatly lies on whether this insurance is contingent to the award of the contract, whether it is a professional/ statutory requirement by the country. But most importantly, the existance of a insurance policy wil greatly mitigate the potential financial loss incurred by the individual, should the legal liabilities assumed by undetaking the project/occupation far outweights its benefits. It is prudent to be protected and be assured that the occupational risk can be covered under a Professional Indemnity policy
Local regulation in Singapore requires all companies to insure its manual workers and/or workers whom earn less than $1600 get a Work Injury Compensation (WIC) insurance policy. Statutory laws requires certain professions to be insured for its course of work: for example, doctors, insurance brokers/agents, real estate agents, lawyers, etc. Regulations on niche professionals is required to ensure that the individual(s) do not suffer a huge financial loss due to claims payouts from Professional indemnity policies, hence being able to continue with the underlying project/ service till completion of their contract.
Check with your local regualtory agencies on the requirements to operate your business, or talk to us to find out whether you need to be insured in your profession.
To calculate the amount of policy limit that is required to cover your legal liabilities, you first need to evaluate the job nature, your company’s financial health, as well as the statutory requirements of the country.
Project/ contract value will often stipulate getting a insurance policy as a condition to undertaking the project. In situations whereby there is no insurance covenants, calculate the total amount of legal liabilities you would have assumed if your client were to sue you for performance failure in these contracts and use that figure to instrument the design of the policy.
The professional should also consider the company’s ability to service its liabilities (i.e. operating cost, property lease, staff wages) should they be ensued in a legal battle and unable to operate the daily business. The company’s cash reserves should be used to run the daily operations, and let the insurance policy take care of legal cost and damages
Premiums can start from as low as $1,000, with factors such as industry type/ policy limit/ policy deductables/ claims history affecting the premium tabulation. Risky sectors/ occupations will see premium loadings for professional indemnity policies, and premiums will increase as the policy caters for a higher sum insured limit.
Evidence of prior claims history sees higher policy premiums loading but a higher deductable imposed on the insured will bring the premium to a more acceptable level.
Although factors affecting premium calculation will greatly depend on the insured, an experienced underwriter for certain industries may bring about a lower than average premium rate as compared to other industry players
Professional Indemnity policies are tax deductible. When tabulating your tax return to IRAS, this premium is treated as expense in the company’s Notice of Assessment (NOA) submission. Evidence of payment could be substantiated by policy contract or premium receipt to support proof of payment, and hence it is necessary to keep a proper record of all business insurance purchases in the reporting year.
Whether you are doing your accounts by yourself or your accountant, insurance purchases can potentially reduce your tax payables and at the same time, give the company the assurance and protection it needs to grow the business. Talk to us to find out more on how you can get covered and benefit from a lower tax return.