A guide to professional indemnity insurance

Professional indemnity insurance is one of the key business insurance covers, protecting you if a client claims that you’ve made a mistake in your work.

professional indemnity

What is it?

This insurance can cover compensation claims that your client makes because they believe your work has caused them to lose money. It’s particularly handy if you’re a business that gives advice or provides a professional service.

Even if you haven’t done anything wrong, the cost of defending yourself against claims like this can be high. Professional indemnity insurance can cover the legal costs as well as any compensation payments.

Read more on our FAQ page: what is professional indemnity insurance?

Who needs it?

This insurance is particularly important for any business that gives advice, handles client data, deals with intellectual property or provides a professional service.

It’s therefore a key cover for professions including accountants, management consultants, architects, financial advisors, IT consultants, engineers and journalists.

Read more on our FAQ page: Do I need professional indemnity insurance?

How much cover do you need?

Cover limits for professional indemnity insurance usually start at £50,000 and can go as high as £5 million. Some contracts will specify the level of cover that you’re expected to have.

You should calculate your own level of risk, thinking about how much it could cost you to pay back a client if you made a mistake. Consider the size of the contracts you’re working on, and the extent of the damage that could be done if something went wrong.

Read more on our FAQ page: How much professional indemnity insurance do I need?

What is covered in a professional indemnity claim?

This insurance can cover compensation payments and legal costs if someone holds your work responsible for their financial loss.

For example: An HR Consultant gives advice on how to deal with an issue with an employee.

Unfortunately some of the advice was ambiguous with regards to the procedure to be followed and the client mis-interpreted this leading to an unfair dismissal claim against the employer - who then sues the HR consultant!

A professional indemnity policy would cover the compensation costs and legal fees up to the cover limit of the policy.

Read more on our FAQ page: What does professional indemnity insurance cover?

Other business covers

Public liability cover

This can cover your business if a customer or member of the public suffers a loss or injury as a result of your business activities. The insurance can cover compensation payments and legal expenses. See also:

Employers’ liability cover

This is a legal requirement if you’ve got any employees. If an employee is falls ill at work or is injured in the workplace, this covers compensation claims and legal costs. See also:

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