What is professional indemnity insurance?

An expert guide about professional indemnity insurance

Professional indemnity insurance will provide legal costs to defend a claim against your business and damages awarded by a court, in response to a client or third-party seeking financial compensation for a loss they have suffered.

 What is professional indemnity insurance explained

What does professional indemnity insurance cover?

Professional indemnity covers claims arising from range of civil liabilities including negligence, breach of contract, defamation, breach of privacy, employee dishonesty and intellectual property infringement. Not all policies are equal and depending upon what services you provide and the size of your business, we might recommend different insurers to meet your cover requirements.

 Negligence cover

Negligence cover

Will cover negligence claims from any act, errors or omissions which does not meet an accepted reasonable standard owed to your client.

 Breach of contract cover

Breach of contract

Breach of contract covers claims from any unintentional breach of contract with a client you’ve contracted to provide a service.

 Defamation cover

Defamation cover

Covers demands for compensation from libel or slander which harms the reputation of a person or organisation, including emotional distress.

Understand how professional indemnity insurance can protect your business

Talk to an expert about professional indemnity to see whether the policy cover is appropriate for your business

How professional indemnity cover can help your business?

Professional indemnity policies seek to help protect against mistakes, incorrect advice, design, specification, and negligence. However, the coverage is commonly required under contract by clients to whom you provide your service, or by regulatory bodies to safeguard customers.

Legal defence costs

Offers peace of mind that legal defence costs and damages awarded by a court are covered for mistakes, negligence, breaches of duty or client contracts, whilst providing a service.

Contractual requirements

Helps clients to have the confidence engaging with your business with the knowledge that you have the correct insurance policies in place.

Regulatory requirements

Allows you to meet your regulatory and industry body requirements in offering financial protection when offering a service to your clients.

What is professional indemnity and public liability insurance?

Both covers will pay legal defence costs and damages to compensate another party, however the circumstances covered by the different policies are different. It's important to appreciate the difference, and that most business will be required to arrange both covers to fully protect themselves.

Public liability

Public liability insurance (otherwise known as general liability insurance) will protect against claims arising from injury or property damage of persons other than your employees in the course of your business activities.

Professional indemnity

Professional indemnity will help protect your company against the failure to exercise reasonable skill and care. If you provide a service to your clients, the coverage is important to cover a breach of professional duty.

Professional indemnity insurance explained

As a specialist in your subject matter, clients rely on your skill and due diligence to deliver upon the agreed services. Professional indemnity insurance offers financial protection against failing to exercise reasonable skill and care.

If your business makes a mistake whilst offering a service, provides incorrect or misleading advice, provides the wrong specification / design, or breaches their professional duty or contract, then you need PI insurance.

Professional indemnity insurance covers legal defence costs and damages, in the event a client or third-party (for demation, copyright, or IP infringement) makes a claim against your business and seeks financial compensation for a loss they have suffered.

What do you need to know about professional indemnity insurance?

Understanding how professional indemnity insurance works can be complicated. Working with a specialist PI insurance broker to help identify suitable coverage is paramount. It's also important to understand what other insurance policies should be arranged in combination.

What does professional indemnity insurance cover mean for your business?

Talk to an expert insurance broker about your business needs

Frequently asked questions

Can you provide professional indemnity insurance internationally?

We can help UK registered businesses find cover to protect them offering their services internationally. Typically known as worldwide territorial coverage. It's important to also understand if you sign contracts that identify a different jurisdiction (which legal system would decide on any contractual disagreements), we will need to seek to extend the coverage. US law and jurisdiction will increase your risk exposure under a professional indemnity policy because of the USA's litigious nature.

Why can't you rely on limitations of liability in your contracts?

It is good risk management and standard industry practice to limit your liability to a multiple of the value of the contract value. However, a court of law can award damages over and above what you have agreed under contract. The amount of cover required should take into consideration, how much your clients could lose financially, if you fail to deliver your services.

Why professional indemnity insurance important?

Your business will need to consider indemnity insurance if you provide advice, consultancy, design, plans or specifications to a client. Alternatively, if you handle personally identifiable information or could infringe upon a client’s legal rights. Indemnity insurance by definition will seek to put you back into the same financial position before the claim.

How does claims made professional indemnity insurance policy work?

PI cover works on a 'claims made' basis, whereby the current policy will respond to the claim made, irrespective of when the work was completed. Provided that such services did not occur before the retroactive date, for further information click the link. The trigger of a 'claims made' policy is when you become aware of the circumstances that may give rise to claim and then notify the insurer.

How much PI cover do we need?

The amount of PI cover you decide to take out will be determined by a number a factors, including whether you are required to meet any contractual requirements, regulatory requirements. The second most important determining factors are the size of your business and the size of the contracts you undertake. We ask our clients to consider, if you fail to deliver your services how much could your client lose financially? Then consider that defence costs will equate to 50% of the total cost of an average claim.

What is personal indemnity insurance?

Personal indemnity insurance can be sought by sole traders that provide a professional service. The policy would be arranged on a basis that provides cover to the individual, not the company through which the service is provided.

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