Short answer
A professional liability application asks who you are, what you do, how much you expect to bill and which projects you take. A brand new firm uses projected revenue for the next 12 months. Disclose any other business you own, even if it operates separately. Split your work honestly by discipline and project type. If a required field does not apply to you, ask your agent what to enter.
Before you start your professional liability application
Gather a few documents first, and the application goes much faster. New firms usually need the following:
- Your formation date and entity type, such as a PC, PLLC or LLC
- Your professional licenses
- A rough revenue projection for the next 12 months
- Your standard client contract
The standard contract matters because underwriters often ask how you limit liability and define scope. A new firm that has not written one yet can tell the agent so. Your agent can explain what carriers generally look for.
If you are still deciding when to buy, our article on when a new architecture or engineering firm should get professional liability insurance covers timing.
Business information
This section asks for your legal name, entity type and address. Match each answer to your formation documents. Entity labels can confuse new owners. A professional corporation, for example, is a corporation, so choose the corporation box.
The NCARB site offers general background on firm and practice licensure. Your state board sets the actual rules, so check with it if you are unsure how your firm must be structured.
Ownership and other businesses
Applications often ask whether owners or key personnel own other entities. Disclose them, even when they are separate. A common example is an owner who also runs a separate interior design studio.
Carriers ask because they need to know which work falls under which policy. A clear picture of your related businesses helps avoid confusion later about who performed a service and under which entity.
If a spouse or family member owns a business, the answer depends on the question the application asks. Read the wording closely and ask your agent when you are unsure. Whether a policy responds to a loss always depends on its wording and the facts.
Revenue on a first professional liability application
A new firm has no revenue history, so past years can be zero or not applicable. For the next 12 months, enter a realistic projection. Use your signed contracts, your pipeline and your expected hours as a starting point.
Accuracy matters in both directions. Underestimating revenue can create an audit or a coverage question later. Overestimating can raise the premium. Premiums depend on the firm, state, claims history and limits, so a realistic figure serves you best.
Many new owners ask whether an approximate date or figure is acceptable. Reasonable estimates are normal for a new firm. Ask your agent how precise a particular field needs to be.
Disciplines and project types
This section asks you to split your work by percentage. A residential architecture firm might divide its work between architecture and interior design. Be honest, because the carrier rates your firm from this split.
Next, the application asks about project types, such as custom homes, condominiums and commercial work. Condos and certain residential projects often price differently from other work, so list them accurately.
If your mix will change over the year, tell your agent. A firm that plans to take on condo work later may want to raise it now.