Professional Indemnity Insurance

No matter how experienced you are or how long have you been around, errors can still occur costing you or your company to spend awful lot of money to defend yourself.

If you provide professional advice to public (client), you become liable to a member of the public if your professional advice or service resulted in a financial loss to the them. Professional Indemnity Insurance or PI would cover you and provide you legal assistance, should you need to defend yourself against such a claim. Even if a client is dissatisfied with your advice, they can still sue you financially including their legal costs.


Who Needs Professional indemnity insurance?


If you belong to one of the professions below, you need to have professional indemnity insurance in place.


  • Public accountants

  • Property surveyors, architects, engineers, interior designers, property/project managers

  • Event manager, advertising agents, publishers and broadcasters

  • Consultancy services (physical security, digital security, information technology)

  • Hairdressers, beauticians, fitness clubs

  • Travel and tour agents, holiday managing agents

  • Human resource management and recruitment consultants

  • Your industry or regulatory body wants you to have it

Examples


  • If you are an accountant, it is a legal requirement to have professional indemnity insurance in place. As a mistake on your part, can result financial loss to the client, resulting in a claim against you. Professional indemnity insurance will protect and cover your legal cost, if such a situation arises.

  • If you are a property developer, you would certainly know that things can go wrong after the completion of the project. There are great chances that your client may sue you for financial loss and a professional indemnity insurance is there to protect you in such circumstances.


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What Does Professional Indemnity Insurance Cover?

Professional indemnity insurance is there to protect you against a single, or multiple claims made against your business. As each business is different, so the types of claims can also be different, depending on your business type or sector. We have few examples below describing various scenarios where businesses can get sued for providing advice that resulted in financial loss or personal injuries.


Financial loss of a failed product


If you design and deliver a product (tech or software) to a client that fails, a product liability policy may cover the damages such as interruption to the business, but this policy will not cover the cost if you have to redesign the product or repair it. If your client sues you over this issue, a policy cover of professional indemnity insurance will cover you in this scenario.


Conditions of Professional Indemnity Insurance Cover

Here are some general conditions for professional indemnity insurance covers offered by most insurance companies. However, conditions mentioned here are only for guidance purposes and you should read your insurance cover in details to understand all the conditions.

Professional indemnity cover is usually offered on a claims-made basis. This means that your insurer will only cover you or your business for claims that are brought against during the term of your policy. If a claim is made against you or your business after your policy has expired ­– even if the incident occurred while your policy was in place – you will not be covered for that claim.

For example, if an incident occurred in 2019 when you had professional indemnity cover, but the client brings a claim against you in 2020 – after your policy has expired – your insurer will not cover you for that claim.


How much Professional indemnity Insurance Cover you Should Have?

As a rough guide, businesses should have around £2 millions of professional indemnity insurance cover in place. But then again, your insurance cover will depend on factors like, size of your business, number of clients you serve or in case of legal practice, you may need to have a certain level of cover as dictated by your regulatory or professional body.