If you run your own business and you offer advice or a professional service to clients, then you're likely to need professional indemnity insurance. This type of cover could help protect you financially if you are faced with a negligence claim. If you make a mistake or offer flawed advice which has a negative impact on your client or customer, they may seek some compensation.
Also referred to as ‘PI insurance’, professional indemnity cover can offer a safety net if you’re found to have failed in your duty as a professional and can be a lifeline if you incur significant legal costs and expenses following a claim for damages due to a failure or lack of care on your part.
Duty of Care
As a professional, you have a duty to offer 'reasonable skill and care', as part of the service you provide. If you fail to exercise this duty and are subsequently proven to be negligent, you may be liable for any losses incurred by your customers or other third party. Proving your innocence isn’t cheap so in today’s litigious climate it pays to be protected.
How does it work?
Depending on the service you provide and the types of clients you work with, the client may specify a minimum limit of indemnity cover as part of the contract. Many public sector organisations will demand a minimum of £5 million of professional indemnity cover before a contract is approved with a consultant or contractor. This means that if you don’t have it you could be missing out on lucrative commissions and projects.
Anyone who offers their knowledge, experience or skills as a paid service could benefit from professional indemnity cover. It’s now a common requirement for many professions such as solicitors, financial advisors, designers, accountants, architects, insurance brokers, builders and PR and marketing consultants.
What’s the difference between professional indemnity insurance and general indemnity insurance?
Typically, general indemnity policies will only cover bodily injury, property damage, personal injury or advertising injury claims. Professional indemnity claims are generally due to negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice and so may not cause physical damages, personal or advertising injuries.
For more information on professional indemnity cover, read our business insurance guides or compare quotes now with Policy Expert.