Professional indemnity/liability insurance (BAV)
As an entrepreneur you bear a certain responsibility for your company and the products and services that you provide. Unfortunately, there are times where something can go wrong, leading to damage for third parties. In these cases, you as an entrepreneur can be held liable. For example, consider a product that malfunctions causing injury, or a customer slipping and hurting themselves in your store. Be aware of the potential pitfalls and get as much protection as you can. AVP insurance only covers personal, private liability, so look for professional liability insurance and business liability insurance to offer complete coverage for your business.
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Importance of a professional indemnity insurance (liability insurance - BAV)
It is only natural for mistakes to be made, in all walks of life. Sometimes it can’t be helped. In some professions though, a small mistake can have massive consequences. A customer can hold you liable for the damage and it could become very expensive. To help find a solution for such a problem you should take out professional liability insurance (BAV).
What is professional indemnity insurance (BAV)?
An additional insurance that can be added to the Business Liability Insurance that you hold, professional indemnity insurance covers you against damage caused by professional errors. Each policy is tailored to the specific profession. Damage that is caused by negligence, an error or omission during the provision of services is covered by this policy. Additional costs are also often covered, such legal costs if there is a dispute about liability that is settled by the court.
Offered by various insurance companies
You’ll find professional liability insurance is offered by many insurers. They often focus on providing tailor-made policies that focus on a certain profession. For example, there are some insurance companies that focus on providing cover for the engineering sector. You can see an overview of professional liability insurers in the Netherlands here.
How to choose insurance
When choosing an insurance policy, it is important to find out as much information as you can. Is there a deductible? What is covered by the policy? What is considered professional misconduct? How high is the fee? What is the cost of the premium? Always discuss this with the insurer before signing up for the policy.
What is insured?
Professional indemnity insurance only covers financial loss to third parties. By this, we mean financial loss up to certain limits in cases of professional liability. The activities that are covered will be detailed in each specific policy conditions. Always discuss with the insurer what is and what is not covered with your own policy.
What is not insured?
Professional indemnity insurance is there to cover financial damage to third parties due to a professional error. The following are not insured:
Own damage, such as missing out on salaries, expenses, or having to perform the service again
Property and personal injury – these are covered by company liability insurance
Fines, warranties, liability-enhancing clauses
Fraud
Design
Property crimes
Intellectual property rights
Overview of coverage and exclusions in professional indemnity insurance
Every policy is different, and the exact coverage may differ between insurer and insured. Always discuss with the insurance company to examine precise policy detail, but below is an overview of what to expect:
Insured in professional liability insurance
Damage caused by a professional error (not properly carrying out an assignment)
Damage caused by providing incorrect advice
Damaged caused by employees who commit a professional error or provide incorrect advice
Cost of expertise following a claim for damages
Statutory interest on the damage amount
Not covered by professional liability insurance
Damage due to non-execution of an order
Damage due to late execution of an order
Damage due to incorrect price calculations
Damage due to violations of intellectual property law
Damage caused by asbestos and environmental damage
Libel or slander
Fraud, intent and property crime
Frequently asked questions about indemnity insurances
What is the difference with business liability insurance?
Professional liability insurance is for times where a professional error has occurred as a result of entrepreneurial risk. It is not always about material damage, this is where business liability insurance helps. Professional liability insurance is an addition to business liability insurance.
Who is professional liability insurance for?
Examples of professions where professional liability insurance is taken out includes consultants within finance and control, human resource management, marketeers, ICT specialists, project managers, and any profession where a professional error could immediately lead to (major) damage.
Do I have to use the insurer’s general terms and conditions?
No, it is not mandatory to use general terms and conditions. The insurer assumes that you make agreements with your clients. These agreements must include liability-limiting provisions. Do not copy the general terms linked to other professions, as it is better to have a custom-made policy that suits your specific profession and potential claims. What does ‘run-in risk’ mean? This is the liability attached to past activities. This can be insured for an additional premium as most insurers do not cover this risk as standard. How much does professional liability insurance cost? Every policy is unique, but on average the monthly cost is between 30 and 100 Euro, but this will change depending on the exact profession, the turnover of the company, what you want to insure, and how much deductible you take.
How much does professional liability insurance cost?
Every policy is unique, but on average the monthly cost is between 30 and 100 Euro, but this will change depending on the exact profession, the turnover of the company, what you want to insure, and how much deductible you take.
What does ‘run-in risk’ mean?
This is the liability attached to past activities. This can be insured for an additional premium as most insurers do not cover this risk as standard.