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Professional indemnity insurance
Helps protect you if a client claims that your service, actions or advice have caused loss or damage to them.
Get a quoteWhat is professional indemnity insurance?
Professional indemnity insurance, also known as PI insurance, is a type of business cover that can help protect you when working with clients. If a client accuses you of giving them inadequate or inaccurate advice, PI insurance could help to cover the cost of your legal defence, and any potential compensation.
There are also other names for professional indemnity insurance, including errors and omissions insurance. This name is mainly used in the US, but it means the same thing.
Whatever you call it, protecting yourself with insurance could be valuable to your business, helping you to manage claims and related impacts. Without it, could your business sustain a large compensation payout or legal bill?
What does professional indemnity insurance cover?
Professional indemnity can help cover incidents from a small error to a large oversight. This includes if your client makes a claim that you have misadvised them, and this has then caused them a financial loss or harm to their reputation. While you may not mean to make a mistake, PI cover can add a level of protection for you and your business if a claim is made against you.
No matter how small or big, PI insurance can help protect you from legal fees and compensation claims due to:
If you provide a professional service in exchange for a fee, then chances are professional indemnity insurance could be valuable to you. In some sectors, it can be compulsory if you are a member of a professional body. For example, accounting and architecture.
Here are just a few of the high-risk professions that may like to consider a PI insurance policy:
How much does professional indemnity insurance cost?
Much like other insurance types, the premium for professional indemnity insurance depends on various factors. Your insurer will ask questions about your business, and the costs will vary depending on the answers you give.
The factors that can impact your cost include:
- Business scale. Your annual turnover can help your insurer work out the size of your business. The more money you make, the more work you do, and the higher the risk of a claim. This in turn can make your insurance more expensive.
- The type of service. Different lines of work will face different levels of risk. You may see higher costs if you're working in a sector where negligence can result in substantial financial consequences.
- How much cover you need. The more cover you need, the more it will cost. If you were to have £5 million indemnity cover, it would cost more than £250,000 worth of indemnity cover. This reflects the extra exposure to risk for the insurer.
- Additional insurance. Beyond professional indemnity, other insurance policies like public liability and employers' liability may be needed. Try to look for policies that are tailored to your needs and can safeguard against various risks.
How much professional indemnity cover do I need?
Professional indemnity insurance can help cover the cost of defending or settling claims you may face. Every business is unique, so there’s no set amount of cover you need.
Here are a few things you may want to consider:
- Whether your clients or industry body request that you have professional indemnity insurance in place.
- The type of clients, accounts and contracts you have.
- The size of your business. Larger ones that work in high-risk areas may need more cover than small, start-ups with low risks.
- Your legal fees, including the cost of hiring a solicitor, which can cost thousands of pounds.
Frequently asked questions
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No, professional indemnity insurance is not a legal requirement. However, some professional bodies and industry associations may require you to have PI insurance in place if you are a member.
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No matter how big or small, any business can have professional indemnity insurance. Though it can be especially helpful for service-based businesses that work with clients. In this case, it can help mitigate costly fees and lawsuits from clients due to negligence claims.
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If you don’t have professional indemnity insurance, you could put your business at risk. If you get taken to court or a client sues you, you may have to take a loss of income. This can be at a great cost to your company.
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A range of industries should consider professional indemnity insurance. It can help anyone that gives professional advice to a client, which can impact them financially. This includes financial advisors, surveyors, healthcare professionals, designers and more.
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No, professional indemnity insurance does not usually cover poor workmanship. The only exception is if you have specified this within your insured services.
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Below you can find some examples of professional indemnity insurance claims:
- An accountancy firm is being taken to court after a client loses money from taking their advice.
- An engineering company is liable as they made mathematical errors that led to a rise in costs for the build.
- A media brand designs and runs a campaign for a client where brochures have the wrong address. The client claims for lost revenue.
- A designer uses a copyrighted photo on a poster without realising. Their client is then sued and the designer could be liable to pay compensation.
- An architect is sued due to building an extension with a flawed design.