Layering of Policies

16th August 2010

 

Layering of policies

Professional Indemnity insurance requiring high limits of indemnity will generally be placed in a series of “layers”. Insurers often specialise in different levels, some preferring to insure where there is a higher probability of claims but a commensurately higher level of premium (Primary layer) and others where there is a lower probability of claims for a lower premium (Excess Layers).

Layering of insurances can affect pricing. Care must be taken to ensure security of insurer is not compromised when layering policies to achieve premium savings.

Two things are important to understand:-

  • Each layer of insurance is a SEPARATE discrete contract with its own insurers, 
    and
  • Excess layers must have a wording that insures the risk on the same terms as the Primary layer. If there are any variations there is a serious risk of a GAP in cover.