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Do you need professional indemnity insurance?
Do you need professional indemnity insurance?
May 20, 2011
Business insurance can be a confusing field – and few insurance types are as misunderstood as professional indemnity.
Professional indemnity insurance helps to protect your business against expensive claims from clients or third parties and can be an important investment in your financial future.
What is professional indemnity insurance?
If you make a mistake in the course of your work and a client or third party suffers a loss or damage as a result, you are likely to be held liable. Professional indemnity insurance protects you against claims of this sort.
A simple mistake can potentially have expensive consequences. Indeed, a single claim can easily be enough to financially cripple a small business. Professional indemnity insurance can help you guard against this risk, by covering the costs of such a claim and footing any related legal bills.
Who needs professional indemnity insurance?
Professional indemnity insurance is a wise investment for businesses in a wide range of fields. If you provide advice, skills, or knowledge in the course of your work, you should seriously consider getting cover. It is a sad but inevitable fact of life that accidents do happen and you need to make sure you are protected against them.
Some businesses also have a regulatory requirement to take out professional indemnity insurance at a certain level. This is particularly common in professions such as accountancy, where practitioners may have to prove they have sufficient cover. Additionally, you may find that prospective clients expect you to have professional indemnity insurance before they will do business with you.
What if I don’t have professional indemnity insurance?
If you do not have professional indemnity insurance, you place your business at risk from potentially expensive claims. These claims could come from clients or third parties and can arise from the smallest of mistakes.
It is worth noting that the total cost of a mistake or negligent action is not necessarily limited to a settlement with the client or third party. Legal fees can significantly inflate the total cost – but a good professional indemnity policy will also cover these expenses.
Is professional indemnity insurance expensive?
The cost of your professional indemnity cover will depend on a range of factors, including the nature of your business and its legal history. But cover of this sort can be very affordable – and, crucially, it should be seen as an investment in the future financial stability of your business.
It is also important to see professional indemnity insurance in the context of the suite of covers your business might require. Depending on the nature of your activities, this might include product liability, public liability and employers’ liability insurance. It is often more cost effective to buy a combined business insurance policy that incorporates all of these covers.
Deborah Reid, underwriting manager at Simply Business
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Comments
Professional Indeminty Insurance is essential for all businesses offering services to the public or other businesses, particularly highly regulated industries such as legal and accountancy. It doesn't cost to much to the insurance and the level of cover should reflect the level of your contracts or the complexity of the work you often perform, not everyone needs cover of up to £2million for example.
you want cheap indemnity insurance, but be forewarned: not every professional indemnity insurance policy is suitable for you. Look for specialist PI policies tailored to the needs of freelance professionals & more specifically the industry you work in. Always read policy fine print, paying particular attention to any exclusions. Make sure you compare PI quotes on a 'like for like basis' ie are the limits of indemnity 'any one claim' or 'in the aggregate' also what are the excesses? These can vary from insurer to insurer. Next, check the credentials of the underwriter & the broker whose business should be FSA regulated. Only select reputable professional indemnity suppliers who are financially strong. Lastly, if you already have professional indemnity insurance & are changing to a new insurer make sure you check the new indemnity policy has 'backdated' or 'retroactive' cover to protect you from work carried out in the past.
Professional indemnity insurance is a must. I am in the process of starting a new business and was extremely surprised that, for the level of cover I required, Simply Business quoted us at an affordableprice.
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