Professional Indemnity Insurance


Professional Indemnity Insurance Explained

 Those whose business offers professional services or handles client data should take out professional indemnity insurance. Protecting against the cost of compensation for clients who suffer loss or damage as a result of your business being negligent, this type of cover could save you thousands or even millions of pounds in the future.

Who needs professional indemnity insurance?

Professional indemnity insurance is required for those who offer knowledge or skills, or are responsible for the intellectual property of a client. Therefore, if you are any of the following, you need to take out a policy:

  • Accountants
  • Financial advisers
  • Solicitors
  • Contractors
  • Architects
  • Chartered Surveyors
  • IT professionals
  • Teachers and private tutors
  • Designers
  • Fitness professionals
  • Some healthcare professionals
  • Advertising / design / PR agencies

If the client considers a mistake to have been made that costs them money – whether it includes a breach of confidentiality, loss of data, poor advice or defamation – they can sue you for compensation of this loss.

By having professional indemnity insurance, you protect your business against this legal action. Even if you think you have done nothing wrong, the cost of taking a case to court could be extremely high, so having a policy in place will help cover this expense.

Small businesses or contractors might feel it is not necessary to take out professional indemnity insurance. However, the size of the business has no impact on whether a client decides to sue or not. Even if your service was free, they can still file a lawsuit against your company if they feel they have suffered a significant financial loss due to your negligence.

Therefore, it is worth taking out no matter how confident you are in your abilities not to make any mistake for your client.

Choosing a limit of professional indemnity insurance

Once you have decided to take out professional indemnity insurance, you will need to work out what level of policy to go for. Insurers offer products that protect against claims worth £50,000 to £5 million, so it is up to you what you would want to be covered against.

To decide this, it is worth determining what legal action against your business might cost, depending on your profession and clients.

You should check whether your professional body stipulates a minimum amount of protection. For instance, solicitors need to have professional indemnity insurance for between £2 million and £3 million.

Do not forget to speak to your client as well, as they might specific the level of protection you need to work on one of their projects.

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