What is professional indemnity insurance? It is a type of insurance that protects from acts, errors, omissions or negligence

What is professional indemnity insurance? Explained and defined

Written by Simon Taylor


Professional indemnity insurance is a policy that can not only provide for legal support and financial protection, it can promote trust with your clients that you have sufficent financial resource available to meet future compensation claims

As a specialist in your subject matter, clients rely upon your skill, knowledge, and due diligence to deliver on the services agreed. If a client feels you haven’t delivered under the terms of your agreed contract or have breached your professional duty, they may consider seeking financial compensation through the courts. Additionally, many regulatory bodies, and clients may require you to buy professional indemnity insurance to meet industry regulations or as a condition of engagement. 

Defining professional indemnity insurance

Professional Indemnity Insurance (PII), also known as professional liability insurance, is a type of coverage designed to protect individuals and businesses providing professional services from financial losses arising due to acts, errors, omissions, or negligence. This insurance provides a safety net for professionals, offering legal and financial protection in the event of demands for financial compensation by clients who believe they suffered a loss as a result of your actions or advice.

What does professional indemnity insurance mean?

Professional indemnity insurance means you can rest assured your business is protected against any civil liability legal action in the course of your professional business activities, whether the claim for compensation is frivolous or not. Having quick and timely access to a quality legal defence means you can stay one step ahead. Claims for compensation can be expensive and time consuming, having professional indemnity insurance means you can focus on running your business.

"Professional indemnity insurance is financial protection against the failure to exercise reasonable skill and care in the provision of professional or advisory services."

How does professional indemnity insurance work?

A professional indemnity insurance policy will cover the legal costs associated with defending claims and provide for damages awarded by the courts. The cover will typically extend to cover claims arising from range of civil liabilities including negligence, breach of professional duty, breach of contract, defamation, breach of privacy, employee dishonesty and intellectual property infringement. However, it's worth speaking to an expert to ensure the cover is adequate to meet your requirements.

Why professional indemnity insurance is important?

If a client feels you haven’t delivered under the terms of your agreed contract or have been negligent, in an increasingly litigious society they may consider seeking financial recompense through the courts. Professionals need to ensure they have sufficient business insurance protection to guard against claims for financial compensation. Professional indemnity insurance allows your business to trade with the knowledge you have access to legal and financial support if required.

What professional indemnity insurance excludes?

Cover will typically exclude guarantees, warranties, liquidated damages (promise to pay if a service is not performed), or assume a third party's liability. Each insurer's professional indemnity policy will have different terms and conditions, therefore its worth considering the exclusions applied to the proposed cover. It's also worth considering whether your services could ultimately cause bodily injury or property damage - for example heath and safety consultancies should consider cover that does not contain an absolute exclusion. 

Guide to professional indemnity insurance


Originally posted by Simon Taylor, Get Indemnity™

This guide is for information purposes and based on sources we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.