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