A guide to Professional Indemnity Insurance
A Professional Indemnity Insurance Policy can help to protect you and your businesses against potentially costly claims of poor quality work, or negligence.
Everybody makes mistakes and, put simply, Professional Indemnity Insurance (PII) protects you against the financial impact of making mistakes in your professional life. It covers you against compensation claims brought by clients who feel you have caused them a financial loss, for example through negligence, poor quality work or bad advice. Even where you feel you haven’t done anything wrong, PII can protect you against the legal costs of defending yourself.
Who needs PII?
If you provide advice, handle client data, deal with intellectual property or provide a professional service, you could benefit from taking out PI insurance. It is particularly useful for people working in occupations such as building, accounting, consulting, engineering, architecture, financial advice, and journalism. Some professional industry bodies require their members to have PII, but even if that doesn’t apply to your own industry, you may find that many clients require you to have PII as a term of the contract. And you may well be thankful of it further down the line.
Types of policy
The type and level of cover you will require depends very much on the type of business you work in, the size of your company, and the type of clients you deal with. Insurers generally tend to offer cover between £50,000 and £5 million, and some clients will specify the level of cover you need in order for them to do business with you.
You can also choose between ‘any one claim’ and ‘aggregate’ cover. An ‘aggregate’ policy only provides cover up to the full limit for all claims made in the period of insurance, whereas an ‘any one claim’ policy provides cover up to the full limit for each individual claim, and is considered the more comprehensive of the two.
Another option you might want to consider is ‘run off cover’, which covers you against claims brought against you after your business has ceased trading. This can be a useful safety net, particularly for retired business owners.
Making a claim
Claims against your PII can come in many shapes and sizes, including accusations of contract breach, defamation or negligence. In some cases, there may not be a concrete claim straight away, but look out for warning signs such as withheld payment, a deterioration in the working relationship, or a seemingly idle threat from a client, which could signify that an official claim is on its way. When it comes to making a claim, speed is of the essence, and you should let your insurer know about any potential claim as soon as possible. Failure to do so could result in your claim being rejected. Even if nothing comes of it, you will still be able to benefit from your insurer’s expertise.
Finding a policy
Professional Indemnity Insurance is generally supplied by specialist insurers who are experts in their field. With so many options available, it can make sense to use the services of an insurance broker with expertise in your professional area. They will be able to guide you through the process and the options available to you, helping you to find the right cover that leaves you and your business protected should the worst happen.