What is professional indemnity insurance?
Professional indemnity insurance (also known as PI or professional liability cover) covers you against compensation claims that arise as a result of errors or omissions with your work, particularly if these problems cost your clients money or status.
Do I need professional indemnity insurance?
If your business provides advice or professional services to your clients then PI insurance could be helpful. If your client uses your advice or services and then ultimately ends up losing out, your insurance is there to help you to cover the cost of claims against you. Even if you and your business have not done anything wrong, your insurance can help you to cover the legal costs of defending against claims.
Which professions need PI?
You are not legally required to take out professional indemnity insurance, but it can provide valuable security for any small business. If a claim is made against you and you do not have cover, it can have serious consequences.
In addition, some clients will want to check that your business has professional indemnity insurance before signing any contracts with you. Be sure to state you have cover in contracts.
Some professionals will almost certainly need to consider PI insurance. These include:
- Financial advisors
- IT consultants
- Business consultants
What does professional indemnity insurance cover?
- Negligence: if you make a mistake in your work for a client then you fail in your duty of care. For example if your business is offering financial advice and you give guidance that ends up resulting in your client making a loss, your professional indemnity insurance will help you cover the cost of claims against you.
(IP): your intellectual property covers your ideas and business solutions. If you present your plan to a potential client and they take your ideas to use themselves, professional indemnity insurance can help.
- Document or data loss: your documents and data are vital to the day-to-day running of your business. For example, if a client list is stolen from your office, you could end up losing income or clients to your competitor.
- Dishonesty: no one likes to think about it, but you could end up being the victim of dishonesty in your business. If an employee or trusted colleague steals from you (and this affects your clients) it can cost your business.