Professional Indemnity Insurance
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If you're self-employed or a small-business owner, you should think about taking out a professional indemnity policy. We can help you find the protection that suits you and your business needs, and compare deals to help you find a great one.
What is professional indemnity insurance?
Professional indemnity insurance, sometimes referred to as PI insurance, is a form of protection against compensation owed to a client. Compensation can vary significantly, based on the type of claim that’s awarded as well as the severity of the individual circumstance. A professional indemnity policy will allow you to recover losses from compensation claims made against you, reducing the financial impact to your business.
What does professional indemnity insurance cover?
You may receive cover for causing a financial loss, or reputational damage, to a customer for:
- Breach of confidentiality – this includes sharing information without permission, or infringing any copyrighted material, trademarks or intellectual property rights
- Professional negligence – this may be through a mistake on your part, or incorrect information or advice provided to a customer that loses them money. It may also include your client overrunning on their budget and making a compensation claim against you
- Bodily injury – if a customer is injured due to your negligence
- Property damage – if the building or its contents are damaged due to negligent work
- Loss or damage to goods or information – loss or damage of any stock, equipment or other belongings, as well as information including documents and data
- Acts of defamation – such as libellous or slanderous statements made about a customer/client
- Legal costs – includes compensation payments awarded to the defendant. Your defence costs are also paid, including legal fees.
This type of cover, if you own your own business, may also extend to your employees.
Professional indemnity insurance will only cover you for claims made during the time you’re insured. For example, if you bought a year's professional indemnity insurance policy in January 2020, and in February 2021 you give advice to a client that ends in a claim, you would not be covered for that claim. Nor would you be covered for any advice given before the policy was bought.
Still have questions? Your provider should be able to walk you through the policy to help you better understand the insurance.
Do I need professional indemnity insurance?
Not every business needs professional indemnity insurance – it isn't legally required. Usually it applies to businesses that offer knowledge, skills or advice as part of their work. It’s a popular type of insurance with small businesses that provide professional services. It might also be needed by a self-employed person, such as a consultant or an accountant, or by a company doing certain types of work.
The kinds of businesses that might need professional indemnity 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.
Some professionals will need to have professional indemnity insurance if they want to be a member of their professional body, or their industry might have regulations that require them to have the insurance. These professionals include:
- financial advisors
- business consultants
- construction workers
- chartered surveyors
- coaches and trainers
- some medical professionals
- you could also find that your contract with a client company requires you to have this cover in place.
Our quote journey allows you to choose from over 1,000 trades and professions. If you can’t find a close enough match, just give our team of insurance experts at Simply a call on 0333 016 5956.
How much does professional indemnity insurance cost?
The cost of an indemnity insurance policy depends on both the size of your business and the type of industry you work in. Larger businesses typically have greater financial assets, which may need higher levels of cover. If you work in a high-risk business area, such as financial services or investments, your premiums may cost more.
A quick and easy way to find out how much professional indemnity insurance costs is to compare quotes with us.
How much professional indemnity cover do I need?
While most professional indemnity insurance providers offer cover ranging from £50,000 to £5 million, how much cover you need is unique to you. You will have different risks and circumstances to cover, depending on the size and nature of your business. The larger the business you own, the greater the level of cover you may require. If you have large amounts of product stock, you may want to cover them in case of faults. If you’re providing financial services, the advice and guidance you offer will hold another type of value.
Some businesses will require you to have professional indemnity cover, so you should read your contract carefully to find out how much cover they will require you to have.
When you’re deciding how much professional indemnity insurance you need, it’s a good idea to check whether your professional body or regulator specifies a minimum level of cover. You should be able to find this in your membership agreement. For example, some businesses regulated by the Financial Conduct Authority (FCA) must be covered for a minimum of £1 million.
Each professional body and regulator may vary though, so, if you’re unsure, it’s best to contact your industry body to ensure you have the minimum level of cover required.
Frequently asked questions
What kind of claims does professional indemnity insurance cover against?
No matter how careful or competent you are, anyone in business can make a mistake. Here are some examples of the type of slip-ups that could lead to a claim:
- You accidentally reveal sensitive information about a client by forwarding an email to the wrong person
- You print an error on an advertising leaflet that a client sends out to customers
- You breach copyright by using a stock photo on your website without permission
- You leave a laptop on a train that contains sensitive client data like names, addresses or credit card information.
What is a retroactive date on professional indemnity insurance?
The retroactive date is very important on your professional indemnity insurance. This is separate to the date when your policy was taken out. If you have uninterrupted insurance, even if you switch provider, you can maintain a retroactive cover date for your policy. This allows you to remain protected for any work that was done previously.
- You take out cover with business X, you’re covered through the length of your policy
- You leave business X, or begin work with a new client (client Y), you have the choice to continue, switch, or cancel your policy
- If you switch provider, you can agree a retroactive date that covers the period of work with client X, while also covering you for client Y
- If you don’t agree a retroactive date and business X decides to make a claim for compensation against you, even though you are covered while working with client Y, you will not be able to claim on your insurance.
How do I choose the right professional indemnity policy for me?
There are many things to think about when choosing the best professional indemnity policy for your business. To try to make things simple, here are five key things to consider:
- Your profession or business type – you can choose from over 1,000 options, but check if you can tailor your policy for the specific needs of your business, to avoid paying for areas of cover you may not need
- The amount of cover you need – with cover typically ranging from £50,000 to £5 million, this can be a tricky one. You may have contractual requirements from clients that can make this easier to calculate, but, if not, you should consider the size of your business, and the value of the product/service you offer
- Regulatory requirements – some regulatory bodies require a minimum amount of cover. Check with yours to find out how much cover you need
- Excess amounts – always be careful to check this, to ensure you’re able to cover any claims and whether they’re worth making in the first place
- Customer satisfaction – when comparing providers, it’s always worth checking any customer ratings. If possible, try and find out what their payout rate is, so you can feel confident if you need to make a claim
What is the difference between professional indemnity insurance and public liability?
While professional indemnity insurance protects you against compensation owed to a client, public liability insurance protects you against claims made by the general public. If a member of the public is injured on your business’ property, or incurs financial loss that can be attributed to your business, public liability insurance can cover these costs.
Is professional indemnity insurance tax deductible?
Yes, professional indemnity insurance is classified as an ‘allowable expense’, which means it’s tax deductible. Other types of business insurance are also tax deductible.
Is professional indemnity insurance required by law?
There’s no law that says you must take out professional indemnity insurance. But if you work in certain professions, you won’t be able to join some regulatory bodies or industry associations without it. These include the Chartered Institute of Taxation, Association of Chartered Certified Accountants and the Royal Institute of British Architects.
Do I need professional indemnity insurance if working from home?
Professional indemnity insurance depends on the type of work you do, not where you do it. If you or your staff are working from home due to the coronavirus pandemic, you shouldn’t need to change anything. What matters is whether you provide advice, services or designs for your clients.
You almost certainly won’t be covered for professional indemnity under your home insurance policy.
Has the coronavirus pandemic affected professional indemnity insurance policies?
Many businesses have changed the way they work due to COVID-19. If you’ve moved to home-working or taken your business online but the job itself hasn’t changed, your professional indemnity insurance should continue to cover you.
Even if your business isn’t operating as normal, it’s worth remembering that clients could still bring claims against you for mistakes you’ve made in the past. Think about the risks you’re taking if you stop your cover during periods of lockdown.
If you’re unsure about whether your PI policy still offers the right protection, contact your insurance provider for advice.
Can I take out a short-term professional indemnity insurance policy?
In theory you can, but most providers advise against this and some only offer policies lasting for a minimum of 12 months. There’s a good reason for this. Professional indemnity insurance works on what’s known as a ‘claims-made’ basis. This means there must be an active policy in place for you to make a claim. Suppose you had a short-term contract that ran from January to July but you’re sued by a client after a costly error comes to light in September, you won’t be covered.
How do I get ‘proof of cover’ so I can secure a contract?
When you take out professional indemnity insurance, your provider will usually email your policy documents to you straight away. Some clients will ask to see proof of cover before they hire you. You can show them your insurance certificate outlining the level of insurance you have for the type of work they’re asking you to do.
What other types of business insurance might I need?
As well as professional indemnity insurance, you may need additional insurance for your business, such as:
- Employers' liability insurance – if your business has one employee or more, it's a legal requirement to have this insurance. It covers you if your employees are injured or become ill as a result of working for you
- Public liability insurance – covers your business if someone gets injured on your business property or if you damage someone else's property while working
- Business interruption insurance – covers you for a period of loss of profits/sales when you’re unable to operate as a business for a situation out of your control – for example, natural disasters
- Business property and contents insurance – insures your equipment and facilities
- Product liability insurance – protects you if someone suffers an injury or damage from a product that you’ve produced, supplied or serviced
How can I compare professional indemnity cover?
With Compare the Market, you can compare and calculate different levels of cover to your business needs. Just input some of your details, and we’ll provide you with a range of quotes, allowing you to pick the best professional indemnity insurance policy for you.
What do I need to get a quote?
To get a professional indemnity insurance quote, you’ll need to tell us some basic information about your business, including:
- your trade or profession
- your name and business postcode
- the legal status of your business (eg: sole trader, partnership or limited company)
- how long you’ve been in business
- your expected turnover for the next 12 months
- any claims history
The quote process will also give you the option to include other types of business insurance.
Business insurance expert
What our expert says...
“Anyone can make a mistake, even a seasoned professional with years of experience. Professional indemnity insurance is invaluable if you’re accused of negligence, breach of confidentiality or poor advice that results in a financial loss for your client. Make sure you’ve got the right level of protection in place to suit your type and size of business.”
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