Every business owner wants to ensure their customers receive the best possible service.
Unfortunately, mistakes can happen regardless of how much care you take when carrying out client work.
Professional Indemnity Insurance (PI Insurance or PII) protects business owners, freelancers and the self-employed. If a client claims that a service provided was inadequate or negligent, PPI covers the cost of the financial loss. It also covers legal fees and potential loss of revenue due to reputational damage.
Who needs Professional Indemnity Insurance?
You are recommended to set up a PII if:
- You provide professional services such as expert advice or consultancy to clients
- Disputes over copyright, intellectual property, or design could stem from your work
- You are vulnerable to professional negligence claims
- Clients provide you with confidential information
- You are a freelancer, consultant, or self-employed
Professional liability insurance helps in a wide range of legal situations. This can include professional negligence claims, data loss claims and allegations you’ve given poor business advice.
There are many professions which are required by their professional bodies to carry adequate Professional Indemnity Insurance. These include:
- Financial advisers
- Chartered surveyors
- Healthcare experts
Is Professional Indemnity Insurance the same as Public Liability Insurance?
The main difference between Public Liability and Professional indemnity is that while Public Liability covers risks of injury or damage. Professional Indemnity was created to pay out in cases concerning professional errors and negligent performance.
Public Liability Insurance covers your business if you are found liable for negligence. Negligence can be caused following an event where someone, such as a customer or member of the public has been injured or had property damaged.
Is Professional Indemnity Insurance required by law?
Professional Indemnity Insurance is not a legal requirement. However, most professional institutes and associations require their members to have some form of Professional Indemnity cover. This is authorised and regulated through their rules and regulations.
Examples can include members of or businesses that are regulated by;
- Association of Chartered Certified Accountants
- The Financial Conduct Authority
- The Royal Institute of Chartered Surveyors
- Association of Accounting Technicians
The only insurance business owners must legally have is Employer Liability Insurance if they are an employer.
How much Professional Indemnity Insurance cover do I need?
This will depend on the service you provide and the degree your profession is subject to regulation.
When estimating how much cover you require, ensure you take into account legal fees and potential loss of revenue due to reputational damage.
PI Insurance can provide peace of mind in the case you are sued for negligent work. It can also provide cover if you have made an error that costs your client money. If you have PII, you will have the funds required to rectify both these situations.
How do I get Professional Indemnity Insurance?
Although there are many insurance providers that can offer you different rates depending on the level of cover you require, it is recommended you use a price comparison site such as BusinessComparision. They will be able to provide a list of suitable lenders depending on your profession, contracts, project values or if your policy is required by a professional body.
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