What is

PROFESSIONAL INDEMNITY

INSURANCE

Professional indemnity insurance is a must for any business that provides advice and/or professional services. If a client suffers a loss as a result of their reliance on your business advice, they may have the right to sue for losses incurred. Professional indemnity insurance secures your business against claims from such clients following professional mistakes or negligence.

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What does professional indemnity cover?

Professional indemnity insurance is also called professional liability insurance or errors & omissions. It covers the legal costs and expenses incurred while defending against a negligence claim made by a client. Apart from negligence, the claims could include inadequate advice, services or designs that cause the client to lose money.

What is the maximum cover I should
have?

Finding the right amount of coverage is tricky since it is difficult to imagine how much financial loss could occur and the subsequent potential claim amount. Usually, your clients will set the level of coverage needed. If it is not stated in the contract, it will be wise to request them to mention a figure in the contract. Legal expenses should be fully covered within the limits of the contract as well.

Are contractors covered under professional indemnity?

If you are using a subcontractor or agent to perform work on your behalf for your client, you may need to make sure that your professional indemnity insurance covers the compensation you may need to pay as a result of mistakes made by them. Professional indemnity insurance usually covers your liability – not that of your contractor or agent, who will need to insure themselves as well. Note that professional indemnity is not an employers’ liability insurance and you will need to cover your staff for illness or injury caused by their work.

Is professional indemnity compulsory?

Certain professions normally require professional indemnity. These include lawyers, accountants, insurance brokers, doctors, and architects. Even if it isn’t compulsory, you may need professional indemnity insurance if your client requires you to have it. This holds true especially for management or consulting businesses, IT professionals, technical and engineer contractors, recruitment agencies, designers or fitness coaches.
You might also belong to a professional body or an industry association which states that professional indemnity insurance is compulsory.