What does professional indemnity insurance cover?
Professional indemnity insurance is a type of protection used to defend businesses against legal claims made against them for a range of different issues, including but not limited to:
- Professional negligence (when you make a mistake while working for a client)
- Lost data or documents
- Accidental break of confidentiality or contract
- Libel or defamation
Some policies offer coverage for damages awarded to claimants and legal costs too.
Do I need professional indemnity insurance?
Some professional bodies make it mandatory for members to take out professional indemnity cover, others will be able to choose to pay for a policy if they believe it's suitable for their business. If you offer your skills, knowledge, or advice to paying customers, you may want to consider a professional indemnity policy. Most of these professions may need cover to be part of their professional organisations:
- Chartered Surveyors
- Financial advisors
- Healthcare professionals
You may also consider coverage if you work in:
- Advertising or PR
My business doesn't offer advice; do I still need professional indemnity insurance?
Consider your business activities carefully and what you do on a day-to-day basis. Consider whether your company offers any recommendations or guidance to any of your clients. For instance, while there are certain businesses where giving advice is an obvious part of a profession, there are many other industries where there are more subtle instances of potential liability.
What kind of professional indemnity insurance do I need?
The type and level of professional indemnity insurance that's right for your business will depend on the specifics of your company. Most organisations will offer two forms of professional indemnity insurance:
- Negligence, Omission, or Error: This provides coverage for claims that arise out of a negligent act, omission, or an error made on the behalf of your business.
- Civil Liability: This is a far broader form of coverage that offers protection against all civil liabilities that might arise from the provision of your services. For instance, some policies might include slander, breach of intellectual property rights, breach of statutory duty, and libel.
How much professional indemnity insurance do I need?
There are policies for professional indemnity that range for coverage in the region of £50,000 to £5 million. The amount of protection you need will depend on the nature of your business, and the area you operate in. However, businesses may find that their clients or customers will specify the level of coverage required from their preferred businesses. If your clients don't give you this information, you can enquire about their expectations before you begin work on a contract.
Will I receive a certificate of insurance?
Some clients could refuse to do business with certain companies unless that business can provide evidence of their professional indemnity insurance. When you take out cover, most insurers will send a copy of your certificate via post and email so you can provide evidence when required. You will then be able to forward an electronic copy of your certificate to possible clients as your proof of insurance.
Do I need professional indemnity if I'm self-employed?
It can be difficult for self-employed professionals to determine what type and level of insurance they need for their business. You should consider the type of business activities you may be involved in and ensure that the insurance you purchase covers you for these.
How will insurance companies calculate my professional indemnity premiums?
When you're taking out professional indemnity insurance, your provider will ask several questions about your business, this is likely to include:
- What type of business you run
- The size of your company
- The number of employees you have
- Whether you've been subject to any claims in the past
These questions will help to determine the level of risk that you pose to an insurer. For instance, if you have had to make indemnity claims in the past, then your risk may be higher, and this may impact the level of premium you pay. It is important that you make your insurer aware of any past claims as failing to do so may impact your ability to make a claim on the policy.
How many times can I claim on a policy?
Some policies will allow you to claim as many times as you need to on your policy, so long as you do not exceed the maximum limit of your indemnity coverage. For instance, if you took out a policy worth £1 million, you could not go over that amount. Other policies may limit the number of claims you can make so it's important that you read and understand the terms of your policy to ensure it meets your needs. Remember you will also need to pay any excess on your claims too.
What is retroactive professional indemnity coverage?
A professional indemnity policy that offers "retroactive" cover when you switch providers means that you will receive coverage from the date when you first purchased your indemnity policy, even if the policy began with a different insurer. This is subject to your ability to maintain a record of your previous policy and the fact that you have maintained continuous cover between policies. Retroactive cover protects you if you need to make a claim for an incident that happened before the start of your next policy.
What do I need to keep in mind with professional indemnity insurance?
When choosing your professional indemnity insurance coverage, it's important to ensure you get enough protection to defend your business from the cost of legal claims. You may consider combining your professional indemnity insurance cover with other forms of business insurance, such as public liability cover and employers’ liability.