Professional indemnity (PI) insurance is a commercial policy designed to protect businesses if a client deems work produced or professional advice provided as inadequate. Indemnity cover, or professional liability insurance, will prevent you from suffering a financial loss when defending or settling the claim.
If you’re a professional business that provides advice and services to your clients, PI cover should be seen as an essential consideration for your business insurance package. It’s important that you feel confident in the quality of your work, but even with the best intentions, accidental errors and disputes over quality can happen.
What does professional indemnity insurance cover?
Professional indemnity insurance covers you if you need to pay to correct a mistake or cover legal costs if you make an error in your work. While this falls undercover for ‘negligence’, you should also consider a policy that offers cover for intellectual property, dishonesty, defamation and loss of documents too.
You would draw upon your professional indemnity insurance if, for example, an employee sends a gossipy email about a difficult client to a supplier and copies it to the client by accident. You may also need it if your IT system fails, causing you to lose some of your client data or documents, and they’re difficult and costly to retrieve.
A case for infringement of intellectual property rights could arise when incorporating copyrighted stock images without permission without asking for permission first. PI insurance can cover you for all these eventualities from the start of your policy. Still, if you’re worried that work you’ve already done may need to be protected against a claim, you can also get a retroactive date for your policy.
Do I need professional indemnity insurance?
If your business provides professional services or advice, handles sensitive data, or has responsibility for intellectual property on behalf of other businesses or individuals, it is worth considering professional indemnity insurance to protect your business. This will cover compensation and legal costs should a client take you to court for mistakes or negligence in your work.
It is a legal requirement for members to hold professional indemnity insurance for some professional bodies and regulators because of the risks associated with the territory. Naturally, the requirements vary between industries. Examples of professions that may be obliged to get professional indemnity insurance as a term of their regulatory bodies are accountants, solicitors, surveyors, healthcare professionals and engineers.