Comparing professional indemnity insurance
Why are you here…?
You’re probably here because you’re self-employed or running a small business, and someone has suggested that you should get professional indemnity insurance. If you want to find out what exactly this insurance is, why you might need it and how to buy it, you’re in the right place.
So what is professional indemnity insurance, anyway?
Well, basically, it’s a kind of business insurance that covers the cost of paying compensation to your clients because you have given them poor service or advice. It’s sometimes called PI insurance.
You would need PI cover if your advice has gone on to cause damage to a client’s reputation, or lost them money in sales or a corporate partnership. The client in question could be a company or a member of the public – and you could even have given the advice for free.
Not for everyone…
It’s not an insurance that every company will need. It applies to businesses that offer knowledge, skills or advice as part of their work. It might be needed by a self-employed individual like a consultant, an accountant, or a company.
Some professionals will need to have PI insurance in place if they want to be a member of their professional body, or their industry might have a form of regulation that requires them to have the insurance. Examples of these professionals include solicitors, accountants, financial advisors, architects, chartered surveyors and some medical professionals.
You could also find that your contract with a client company requires you to have a certain level of this cover in place.
The kinds of business that might need PI insurance include marketing agencies, PR consultancies, management consultants, web agencies and design companies. These are all organisations whose advice could lead a company to change its strategy. If the move is a bad one, it could upset customers, cause sales to nosedive or bring the company into disrepute.
While you may not even agree that your advice was the problem, these things can be very difficult to prove. So you may be better off taking the fastest legal route through it – which is where your insurance might be very useful.
How it works
An important thing to know about professional indemnity insurance is that your insurer will only cover you for claims that come in during the time you are insured with that provider. Here’s an example to explain this. You buy a year’s policy in May 2016. You give a client some advice in October, which goes on to cause significant damage to their sales in March 2017. Your policy finishes and you have forgotten to renew it. When the client puts in a claim against you in June 2017, you cannot claim on your PI policy and have to foot the legal bills yourself.
So it not only matters when you give the legal advice, but also that you have cover in place when the claim comes in. Legally, new claims can be brought against you up to six years after you provide some advice.
If you cancel your professional indemnity insurance, say if you are retiring or changing professions, you should think about purchasing a run-off policy. This would cover you for any new claims against you after your professional indemnity insurance has expired.
Ready to get some prices?
Hopefully you should now have a good idea of whether a PI policy would be useful to you. If so, we can help you compare policies. Just request a callback above. An expert from our business insurance partner Your Insurance will give you a ring to talk about what you might need and provide you with quotes from a panel of insurers.
While we’re at it though, are there any other kinds of business insurance that you might need for your SME?
Other cover you might need
Another important kind of insurance is public liability insurance. This is something you will need if you have customers visiting your premises. As the owner, you’re responsible for making your workplace as risk-free as possible, but unfortunately accidents do happen. Public liability insurance means that if someone is injured at your office or their property is damaged, you can claim on your insurance to cover any compensation due to them or legal costs if they take you to court.
If you have one employee or more, or even volunteers or freelance staff at your office, you need to have employers liability insurance – it’s a legal requirement. Again, this protects you if someone has an accident or their property is damaged at work and they claim for compensation. The minimum level of cover in the UK is £5m.
Beware of the red herrings
Another term that you might come across is public indemnity insurance – this sounds like a mixture of all of the types of insurance we’ve already talked about. You’ll be pleased to hear that this definitely isn’t a policy you will need… because there’s no such thing.
It’s just one of those red herrings where people get the names mixed up. If someone mentions public indemnity insurance to you, they probably mean public liability.