Test professional indemnity limits with contract-level numbers
A professional-services loss is often less visible than damaged equipment.
Advice, design, software implementation, accounting, or another specialist service can trigger a client financial-loss demand and substantial defense cost at the same time.
The provider may also spend its own money to redo work even when that rectification cost is not insured.
This calculator separates those cash flows and applies the per-claim limit, pure-financial-loss sublimit, deductible, defense-cost treatment, and remaining annual aggregate in a visible order.
It also checks claims-made timing, the retroactive date, and the professional-services definition as explicit confirmation gates.
It does not quote premium, determine legal liability, decide coverage, predict a court result, or approve a claim.
The Korea-specific legal sources were verified on August 16, 2026, and the issued policy and current professional advice always control.
Four amounts that should never be blended
Client financial loss
The client demand is the starting scenario, but a contractual cap and coverage terms can reduce the amount used by the model.
Defense cost
Lawyers, experts, investigation, and dispute-management expenses may erode the liability limit or use a separate capped defense amount.
Rectification cost
Internal labor and the cost of reperforming the service remain explicitly uninsured in this model unless a separate extension is reviewed outside the calculator.
Expected annual exposure
The probability-weighted value is a simple planning comparison and is not a forecast of claim frequency or an actuarial premium.
Contract caps are scenario inputs, not legal conclusions
Select the cap only after checking that the clause applies to the relevant contract, party, loss, and cause of action.
The model consumes one contract cap across repeated claims from that contract, but a court or settlement may classify related losses differently.
What to copy from the contract and policy
- Professional-services definition. Confirm that the exact service and insured entity fit the definition rather than relying on an occupational label.
- Claims-made timing. Check the claim date, reporting deadline, extended reporting period, and any prior-known-circumstances wording.
- Retroactive date. Identify the relevant act or omission and how continuous or related acts are assigned to a date.
- Per-claim and annual limits. Record whether related claims share one limit and how prior payments or reserves reduce the aggregate.
- Financial-loss sublimit. Find any lower amount applying to pure economic loss, cyber events, intellectual property, privacy, or another extension.
- Defense treatment. Determine whether defense is inside the liability limit, outside under a separate cap, or not yet confirmed.
- Deductible basis. Check whether it applies to every claim, every claimant, every related series, or once per contract scenario.
- Contractual liability cap. Obtain legal confirmation before using a cap to reduce modeled client damages.
Calculation sequence
Professional indemnity coverage calculation sequence| Step | Rule | Model treatment |
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| 1 | Contract cap | Client damages are limited by the remaining entered cap across claims from the same contract when the cap switch is on.
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| 2 | Coverage gates | An unconfirmed service, timing, retroactive date, or contract sends damages and defense to the coverage gap.
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| 3 | Financial-loss sublimit | Eligible damages above the entered sublimit become a separately reported shortfall.
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| 4 | Deductible | The deductible applies per claim or once across related claims from the same contract, according to the selected mode.
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| 5 | Per-claim limit | Inside-limit defense is allocated before damages to expose conservative erosion of the claim limit.
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| 6 | Annual aggregate | The remaining aggregate after prior erosion is allocated in the order shown on the screen.
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| 7 | Separate defense cap | Outside-limit defense uses the entered separate cap after prior erosion and is never treated as unlimited.
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| 8 | Rectification and expected value | Rectification stays uninsured, while probability weights the total exposure and payout for planning only.
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Simplified formulas
Contractual damages = lower of client loss and remaining confirmed contract cap
Single-claim demand = eligible damages + inside-limit defense − applicable deductible
Modeled payout = amount surviving per-claim, aggregate, and separate-defense limits
Retained loss = contractual damages + defense + rectification − modeled payout
Expected amount = modeled amount × entered annual probability
Claim order matters when the annual aggregate cannot fund every claim.
Reorder the contract rows to test allocation priority because this model processes active claims sequentially.
Actual allocation can depend on notice, related-claim wording, insurer consent, settlement timing, and the rights of multiple insureds.
Worked default scenario in KRW
The defaults use three service groups and four claims: one IT transformation claim, two design and engineering claims, and one accounting and advisory claim.
Uncapped exposure is KRW 1.56 billion, and confirmed contractual caps reduce client damages by KRW 140 million, leaving KRW 1.42 billion of modeled exposure.
The entered policy has a KRW 300 million per-claim limit, KRW 250 million financial-loss sublimit, KRW 10 million per-claim deductible, and KRW 700 million annual aggregate with KRW 100 million already used.
Modeled insurance payout
KRW 600M
The amount surviving sublimit, deductible, per-claim, and remaining aggregate constraints.
Retained business loss
KRW 820M
The balance of modeled exposure after the modeled insurance payout.
Protection ratio
42.3%
The payout divided by modeled exposure, not claim probability or a coverage opinion.
Expected annual exposure
KRW 126.8M
Each contract scenario weighted by its entered annual probability.
Expected annual payout
KRW 60M
The modeled payout weighted by the same simple scenario probabilities.
Expected retained loss
KRW 66.8M
Probability-weighted exposure less probability-weighted payout.
Default professional indemnity gap breakdown| Gap source | Amount | Meaning |
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| Financial-loss sublimit | KRW 200M | Eligible client damages above the KRW 250 million sublimit.
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| Deductibles | KRW 40M | One KRW 10 million deductible applied to each of four claims.
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| Per-claim limit | KRW 60M | Demand remaining after the sublimit and deductible but above the KRW 300 million claim limit.
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| Annual aggregate | KRW 400M | Otherwise payable amounts left after the remaining KRW 600 million aggregate is exhausted.
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| Rectification cost | KRW 120M | Reperformance and correction cost kept outside modeled insurance.
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| Defense aggregate erosion | KRW 190M | Defense payout that consumes the same annual aggregate as damages.
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The largest rounded single-claim demand is KRW 350 million, while all active demands produce an aggregate review upper point of KRW 1.1 billion.
Adding KRW 100 million already used makes the current-period aggregate requirement KRW 1.2 billion, which is KRW 500 million above the entered aggregate.
The entered per-claim limit equals 25.0% of annual revenue, and the largest active contract revenue equals 33.3% of annual revenue.
These ratios provide context only and do not create a revenue-multiple recommendation.
How to interpret the review range
Largest single demand
Use the rounded largest claim demand to compare the entered per-claim limit under one severe contract scenario.
Concurrent annual demands
Use the rounded total of all active claims to test aggregate exhaustion during one policy period.
Prior aggregate use
Add prior payments or erosion to the concurrent-demand point when comparing the full current-period aggregate requirement.
This range is designed to align quote conditions, not to select a policy automatically.
Compare at least two quotations using the same per-claim limit, aggregate, sublimit, deductible basis, retroactive date, defense-cost rule, and extensions.
A cheaper quote with defense inside the limit or a lower financial-loss sublimit may protect less cash even when the headline aggregate looks identical.
Practical service scenarios
IT implementation
Model outage, migration, or integration loss separately from the provider cost of fixing the system, and check cyber and technology-service definitions.
Design and engineering
Test repeated claims against one project cap and confirm whether rectification, fitness for purpose, pollution, or bodily injury belongs under another policy.
Accounting and advisory
Separate a client tax or transaction loss from fees that must be refunded and verify prior-knowledge, dishonesty, and regulatory-investigation wording.
Consulting and project management
Use the specific deliverable and contract cap, then test delay, consequential-loss, and liquidated-damages exclusions without assuming they are covered.
Several contracts in one year
Enter up to five contracts and order them deliberately to see which later claims lose protection when the aggregate is exhausted.
Renewal after a circumstance
Record the notice and existing aggregate use, then obtain written advice on whether the matter remains with the expiring policy or attaches to the renewal.
Korean legal sources verified in 2026
On August 16, 2026, the Korean National Law Information Center OPEN API identified the current Commercial Act as law ID 001702 and history identifier MST 272919, promulgated July 22, 2025 and effective July 23, 2026.
Commercial Act Article 638-3 concerns delivery and explanation of policy terms, Article 719 states the basic liability-insurance obligation, Article 720 addresses necessary defense expense, and Article 724 addresses the relationship with an injured third party.
Those general provisions do not establish one universal professional indemnity limit, deductible, premium, or coverage result.
The current Civil Act record is law ID 001706 and history identifier MST 284415, promulgated and effective March 17, 2026.
Civil Act Article 390 provides the general nonperformance damages framework, Article 393 distinguishes ordinary loss and foreseeable special loss, and Article 750 provides the general tort rule.
The actual duty, causation, recoverable loss, contractual cap, professional regulation, and insurance response remain fact-sensitive legal and policy questions.
Quote and renewal checklist
✓Attach a service and contract table showing revenue, deliverables, client concentration, liability caps, and high-loss scenarios.
✓Align per-claim, annual aggregate, financial-loss sublimit, defense treatment, and deductible basis across every quote.
✓Confirm the named insured, subsidiaries, subcontractors, former entities, territories, jurisdictions, and governing-law restrictions.
✓Compare retroactive dates, continuity, prior-known-circumstances language, reporting deadlines, and extended reporting options.
✓Ask how related claims, multiple claimants, one contract, and repeated acts affect the deductible and policy period.
✓Review cyber, privacy, intellectual property, dishonesty, contractual liability, warranties, delay, fines, and rectification wording.
✓Obtain the amount paid or reserved under the current aggregate and confirm whether defense advances also erode it.
✓Document who may appoint counsel, when insurer consent is required, how costs are advanced, and whether a separate defense cap applies.
Frequently asked questions
How is professional indemnity different from general business liability insurance?
General business liability insurance usually focuses on third-party bodily injury or property damage arising from premises or operations.
Professional indemnity, often called errors and omissions or E&O insurance, focuses on financial loss and defense cost connected with an alleged error, omission, or negligent professional service.
Actual wordings can overlap or leave gaps, so this calculator does not treat one policy as a substitute for the other.
Can I enter the contractual liability cap as the maximum loss?
Only use the cap when a qualified review supports its application to the scenario being tested.
Governing law, the exact clause, gross negligence or intentional conduct, third-party rights, and the cause of action can change whether the cap works.
If the position is uncertain, compare one run with the cap and another without it rather than treating the calculator as a legal ruling.
Is a project that started before the retroactive date always uninsured?
Project start date alone does not answer that question.
The relevant act, related-acts language, retroactive date, prior knowledge, claim date, and notice deadline may all matter.
This calculator does not interpret dates, and it sends the modeled claim to the coverage gap when the retroactive-date gate remains unconfirmed.
Are all defense costs paid in addition to the liability limit?
No universal assumption is safe.
The policy may place defense inside the per-claim and annual limits, provide a separate capped amount, or leave a cost outside coverage because consent or the covered-matter definition is not satisfied.
A separate defense limit of zero means a modeled payment of zero, not unlimited defense.
Does professional indemnity normally pay the cost of redoing the work?
Reperformance, a performance warranty, internal payroll, and the cost of fulfilling the original bargain can be treated differently from damages owed to a client.
Some policies may add mitigation or rectification extensions, but they should not be assumed.
The calculator deliberately keeps every entered rectification cost outside the modeled insurance payout so that a confirmed extension can be compared separately.
Is the KRW 350 million to KRW 1.1 billion range a recommended limit?
No.
In the default example, KRW 350 million is the largest post-deductible single-claim demand rounded up by KRW 50 million, and KRW 1.1 billion is the similarly rounded sum of all active claim demands.
The range is not a statutory minimum, market average, underwriting indication, or personalized recommendation.
Tips and cautions
- Run both capped and uncapped contract scenarios when enforceability has not been confirmed.
- Test a high-defense case because defense inside the limit can exhaust protection before client damages are resolved.
- Keep a zero or unconfirmed sublimit visible instead of replacing it with the headline policy limit.
- Do not add probabilities across correlated contracts as though the events were independent actuarial observations.
- Save the inputs and policy version used for each review so renewal comparisons remain reproducible.
- Ask a Korean attorney, licensed insurance professional, tax adviser, or other qualified specialist about the actual facts and wording.
Important limitation
The outputs are deterministic stress-test references created from the values you enter.
They are not legal, insurance, accounting, tax, or investment advice and do not represent an insurer quotation, underwriting decision, claim decision, court judgment, or statutory minimum.
Profession-specific compulsory insurance, client-mandated limits, and regulatory rules are outside this general model and require separate confirmation.
Build a like-for-like quote table
Enter each material contract, copy the exact policy terms, and compare the largest single demand with concurrent annual demands.
Then take the saved gaps and confirmation questions to a licensed intermediary, insurer, and legal adviser before making a purchase or renewal decision.