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If you’re self-employed or are a small business owner, you should consider 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 deal.
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 contract, confidentiality agreement or copyright
- Causing financial loss through negligence
- Giving incorrect professional advice
- Acts of defamation
This type of cover, if you own your own business, may also extend to your employees.
How much does professional indemnity insurance cost?
The cost of indemnity insurance 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.
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 might be needed by a self-employed person like a consultant or an accountant, or by a company doing certain types of work.
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
- chartered surveyors
- some medical professionals
You could also find that your contract with a client company requires you to have this cover in place.
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.
Frequently asked questions
How does professional indemnity insurance work?
It's important to know that your professional indemnity insurance provider will only cover you for claims made during the time you are insured. So, it not only matters when you give the advice, but also that you have cover in place when the claim is made.
For example, if you bought a year's professional indemnity insurance in January 2018, and in February 2019 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.
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, e.g. 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 much professional indemnity cover do I need?
How much cover you need is unique to you. Depending on the size and nature of your business, you will have different risks and circumstances to cover. 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, whereas, 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.
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 is 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 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 option for you.