Professional Indemnity Insurance Buyers Guide

The What, When, How, Where and Why Guide to Indemnity Insurance for professionals.

Professional Indemnity Insurance is designed to protect you when a problem arises with any professional work you have done. In today’s litigation culture, this form of insurance is becoming increasingly relevant for a range of professions.

Are you thinking about Professional Indemnity Insurance?

Before you buy, it pays to consider the crucial 5 questions:

What exactly is Professional Indemnity Insurance?

Professional Indemnity (PI) Insurance is designed to protect you in the case of professional error. In the course of your working life an instance may occur where unfortunately, the professional skill you exhibit is deemed inadequate. In this situation, a dissatisfied client may seek some form of compensation, resulting in financial implications for you and your business. This is where PI Insurance comes in: it provides financial support for defence costs, withheld fees and any compensation which may be awarded against you. In simple terms, Professional Indemnity Insurance is financial protection against professional error.

Why do I require PI Insurance?

This type of insurance is typically relevant for professionals who regularly give advice to their customers, and/or who are responsible for customers’ data and other intellectual property. It can loosely be regarded as protection against non-physical but nonetheless detectable damages. PI Insurance can be voluntary, but it is mandatory for some professions, such as Architecture, Accountancy and some IT Consultancy.

How does PI Insurance benefit me?

If you are at all liable to be challenged in the competency of your work, or there is scope for your services failing to meet the expectations of your client, then PI Insurance will certainly benefit you. PI Insurance will provide you with financial support if you are accused of professional negligence, misuse of intellectual property, loss of data, dishonesty and defamation incurred by your business. Despite best intentions, no one is immune to mistakes or accusations of mistakes – PI Insurance tackles the consequences of these errors.

When does the cover come into action?

Most forms of PI Insurance work on a claims-made basis. This means that the insurance only covers the claims made during the policy period. If an incident occurs whilst you hold the policy, but the claim is made after you have discontinued the insurance, then the claim will not be covered. On the flip-side, if an incident occurred before the time of holding the policy, but the claim is made once you have the insurance, then you can be protected. Each claim is treated individually – as the policyholder, you can usually select your own limit of indemnity.

Where are there exemptions and conditions?

To ensure the most comprehensive insurance, it is advisable to thoroughly research the policy options available. Many providers of PI Insurance offer industry-specific policies. Requirements are different for each sector: for some, cover is restricted to business carried out within the EU, for example. The policyholder will usually be required to pay an excess for each claim, and the amount varies according to policy. Suitability of Professional Indemnity Insurance can be achieved by the varying levels of cover available. This suitability can be further tightened by bespoke policies which can be continually amended.

Insurance Blog would like to point out that it is particularly important to tailor Indemnity Insurance to the requirements of your individual business. The insurance is ultimately designed to protect you in the case of professional mistakes – choosing the right Professional Indemnity policy is the first step towards annulling these errors. There are many established business insurance specialists out there such as Hiscox that are can help provide would be insurers with further information regarding specialist cover for other areas of your business, a quick internet search will yield the many options and services available!