Loading...

01242 32 31 31

Professional Indemnity Insurance – Ultimate Guide

Professional indemnity insurance – probably a term you have always thought to be associated with lawyers, solicitors, accountants and other similar professions. However, if you are likely to be carrying out work for a client, as well as offering advice, you may want to consider taking out a good professional indemnity insurance policy, otherwise, you could face a hefty bill if any of your work or the advice you give, is wrong.

You work hard to keep your business afloat. Imagine if you almost lost it all due to a small mistake? Small mistakes, which you probably don’t even think about, can still cause another business significant financial loss.

For example, let’s say you misquoted measurements, or you cut pipes to the wrong size which meant the job was unable to be completed. All these instances could result in a claim, and after covering your legal expenses, as well as the claimants, you could be left with a pretty disastrous hole in your pocket. Therefore, you need professional indemnity insurance, to protect you and your business.

We understand professional indemnity insurance is a difficult concept to master. Read our ultimate guide to professional indemnity insurance cover and you could have all your questions answered today.


Professional Indemnity Insurance – What is it?

Professional indemnity insurance, also referred to as PI insurance, is a specialist type of liability insurance which aims to protect businesses and/or individuals who provide advice and expertise to other third parties.

If a client or customer is dissatisfied by any advice they have been given, or they feel work which has been carried out has been inadequate or faulty, they can pursue you for compensation claims to cover their financial losses.

Even if you haven’t done anything wrong, you will still be expected to cover the costs to defend yourself in court, and this can be very expensive. Professional indemnity insurance is therefore designed to cover the cost of your legal defence, as well as any compensation you may need to pay out to the client, should you be held liable.


Professional Indemnity Insurance
– Why do I need it?

Professional indemnity insurance is not a legal requirement for many professions within the UK, however, many professions will still need to have specialist cover as part of their industry body’s regulatory requirements.

Examples of professions in which professional indemnity is a legal requirement include financial advisors, accountants, solicitors and chartered surveyors.

Even if you are not legally obliged to have professional indemnity insurance, it could still prove to be extremely useful in the event of a customer making a claim against you.

Everybody likes to think they are experienced and skilled in the work or advice they provide to clients; however, mistakes can still happen to highly experienced and highly professional people, and the costs that could result would be enough to potentially cripple a business if there was no professional indemnity insurance to fall back on.

If any of the following apply to you, you are likely to need professional indemnity insurance:

  • professional-indemnity-insurance-green-bulletYour profession involves providing clients with advice or professional services, for example consulting or contracting
  • professional-indemnity-insurance-green-bulletYou undertake any work which could be subject to allegations of mistake or negligence, for example you’re a plumber or engineer
  • professional-indemnity-insurance-green-bulletYour profession involves providing designs and plans to your clients, such as an architect
  • professional-indemnity-insurance-green-bulletYour client has requested you arrange a professional indemnity insurance policy, before they agree to work with you, perhaps you work as a contractor, or self-employed professional
  • professional-indemnity-insurance-green-bulletYour industry association/regulatory body requires you to have it

Professional Indemnity Insurance –
What types of businesses need cover?

Professions which should consider professional indemnity insurance include the following:

Accountants

Not only is it a legal requirement, working with numbers is particularly risky. Miscalculations and mistakes, even small ones, can cause significant financial loss to the client, resulting in claims being made. Professional indemnity insurance is therefore a must if you are an accountant.

Architects

Architectural errors often emerge when the work has been completed, meaning clients may lose money to put the mistakes right. It is therefore appropriate for architects to protect themselves through a specialist professional indemnity insurance policy.

Fitness Professionals

If the wrong advice is given to clients regarding fitness tips, the client could potentially injure themselves, which may be down to your negligence or inadequate advice. It is vital then that fitness professionals take out professional indemnity insurance to protect themselves in such situations.

Management and Business Consultants

Advice will play a key role in this profession, alongside training and teaching. Professional indemnity insurance should be considered here in case clients feel the advice or training they have been given has been inadequate.

This list is by no means exhaustive. The bottom line is, professional indemnity is worth thinking about if you are self-employed or own a company which offers advice, knowledge or skills as part of its services.


Professional Indemnity Insurance
– What does it cover?

Professional indemnity insurance will protect you against several claims that could be made against your business. The types of claims that could be made against you will be dependent on your business sector. Let’s have a look at a few examples:

Financial loss/loss of goods

A claim can be made against you if you lose money or goods belonging to a client, if you were legally liable for the safe storage and return of the goods. An example might be a seamstress, who may be entrusted with an expensive suit that the client needs to be altered.

If the seamstress loses that suit, they could be held liable for the financial loss the customer will experience. Compensation will therefore be awarded to the client to replace the cost of the suit – and with professional indemnity insurance, you would not have to front that cost alone.

Losing documents or data

Companies or individuals can sue you if you lose confidential information or data. This would relate to IT contractors who perhaps carry out work on behalf of other businesses.

When data is lost, companies risk their trade secrets falling into their competitors’ hands, and for this reason they would have legal grounds to make a claim. Professional indemnity would protect you in this situation.

Professional negligence

If you carry out work for a client, which is later classed as faulty or inadequate, a client may be able to make a claim based on professional negligence. Errors happen to the best of us and even to the most highly skilled people. Professional indemnity insurance will cover you should such an incident happen.

Imagine for instance, an architect designed an extension, which on completion had to be knocked down and re-built because the design was flawed. This would be classed as professional negligence, and the architect could be held liable to pay the cost of rebuilding the extension plus any legal fees.

Libel, slander of defamation

Claims can also be made against you if a client or customer feels you have written or said something to ruin their reputation. If you have written or expressed something defamatory about a customer or another business that is false, they may have the grounds to take legal action against you.

Libel and slander insurance will cover you in such instances, as even if the accusations made against you are false, you may still have to front the legal costs to defend yourself. This may be included on a standard professional indemnity insurance policy, or you may have to include it as an optional extra.

Breach of copyright or confidentiality

If you break copyright law, you could also face an expensive claim being made against you. This could be done through accidental use of another’s intellectual property.

For example, a media company designs a website for a client, and then that client is sued by another company for featuring its photos on the website. The client could sue the media company in this instance on grounds of breach of copyright.

Whatever sector your business is in, there may be times when claims could be made against you, and even over the smallest of mistakes. It is better to get yourself protected financially, should you land yourself in a tricky situation in the future.


Professional Indemnity Insurance
– How much cover will I need?

The level of cover you require will vary depending on the nature of your business. The more risk associated with the work you carry out, the more likely you are to need a higher amount of cover.

To help you decide on how much professional indemnity insurance you will need you should consider the following points:

  • professional-indemnity-insurance-green-bulletHow big is your business?
  • professional-indemnity-insurance-green-bulletHow many clients do you deal with and how big are any existing contracts?
  • professional-indemnity-insurance-green-bulletHow much would it cost if you had to defend yourself against a claimant in court?
  • professional-indemnity-insurance-green-bulletAre you required by your regulatory body to have a certain level of professional indemnity cover?

It is always a good idea to seek advice from another professional body regarding the amount of cover you will need, preferably a legal company.

As a rough guide, the minimum amount of cover may be around £2m. This might perhaps be useful for a smaller company or sole trader, who has less clients and smaller contracts. The higher-end limit could reach around £10m, and this could perhaps be more useful to larger companies that deal with large contracts.


Professional Indemnity Insurance
– Types of policies

There are usually two types of policy you could consider when looking into professional indemnity cover.

Any One Claim

If you choose to take out an ‘any one claim’ policy, it means your policy will pay up to your indemnity limit on every occasion a claim is made during the policy period. This provides a good level of cover.

For example, if you have an indemnity limit of £3,000,000, every claim you make can be up to that value, as your insurance provider will look at each claim separately.

Aggregate Cover

This type of cover is different to any one cover, as each insurance claim will not be considered separately. This means your indemnity limit on your policy is the limit for all claims accumulated throughout the policy period.

For example, if your indemnity limit is £4,000,000, and somebody makes a claim against you totalling £2,000,000, you will only be able to make a claim of up to £2,000,000 in the future.

Any one claim policies tend to be more expensive, and that is simply because they consider each claim as separate and so the amount that could be paid out to you is higher than on an aggregate cover policy.

Despite this, any one claim policies are favoured the most by business owners as they will provide a better level of protection, should something go wrong. If you are unsure, speak to your insurance provider and they should be able to answer any questions you may have about each policy.


Professional Indemnity Insurance
– What else do I need to consider?

Legal Requirement

It is a good idea to check with your regulatory body whether professional indemnity is a legal requirement – if it is, you will need to get professional indemnity insurance to comply with the law.

Run off Cover

Your business may still be held liable for negligent work it has carried out, even if it is no longer trading. This is equally the same if you are self-employed and decided to retire.

Run off cover will therefore cover you for this period. You should ask your insurance provider if this is included as a standard part of your policy, or whether you will need to add it as an optional extra.


Compare Professional Indemnity Insurance

You should now have all the necessary information you need to help you choose the right policy and level of cover for your professional indemnity insurance. Use Utility Saving Expert’s online comparison tool to help you find cheap professional indemnity insurance.

Combining professional indemnity insurance with other products, such as public liability insurance or employer’s liability insurance, may also reduce your premium, as well as make your policies easier to manage.

Professional Indemnity Insurance

Utility Saving Expert has committed to donating 10% of its net profits to charity. By obtaining a Professional Indemnity Insurance quote using our website you are helping us achieve our commitment to our chosen charities. We hope you find our Professional Indemnity Insurance comparison tool useful.

Professional Indemnity Insurance Disclaimer

Utilitysavingexpert.com Ltd uses professional indemnity insurance quotation technology provided by SEOPA Ltd to enable you, the user to obtain multiple quotes. These professional indemnity insurance quotes are sourced from a carefully selected panel of professional indemnity insurance providers. SEOPA Ltd are authorised and regulated by the financial conduct authority (313860) and their permitted business is insurance mediation.

Copyright Ⓒ 2014-2018 UtilitySavingExpert.com Ltd.

 

[]

[]