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Professional indemnity insurance, also often referred to as PI, professional liability or errors and omissions insurance, is a type of business insurance which covers your company for claims where a third party, such as clients, have lost money or business because of mistakes made in your professional services.
Professional services include designs, advice or consultations provided to a client and contract, intellectual property or trademark disputes between you and a client.
Professional indemnity insurance will cover the legal costs associated with the claim and any compensation your business is liable for if the claim is successful. Professional indemnity insurance covers a wide range of scenarios which could result in your clients losing money or business.
These include:
Businesses that would benefit from professional indemnity insurance will be those that enter into contracts with other companies or third parties to provide professional services.
This includes businesses providing services such as designs, advice, and consultancy, or your work exposes you to disputes or claims around professional negligence, malpractice or the quality of your work.
Companies that don’t offer professional services or enter into contracts with clients are unlikely to need professional indemnity insurance.
A wide variety of businesses should consider taking our professional indemnity insurance.
These include:
Whilst there isn’t a legal requirement for professional indemnity insurance in the UK, it’s worth considering if you run a business offering professional services.
Mistakes happen, and it’s essential to make sure your business is protected when they do. When considering whether or not you should take out PI insurance, consider the ramifications of a lawsuit and whether your company could withstand a claim without insurance.
Professional indemnity insurance is priced based on the specific risks your business faces, meaning that the cost of premiums can vary significantly between companies.
The cost of professional indemnity insurance for your business will depend on several factors, such as:
Some businesses will need both public liability and professional indemnity insurance. Some will need one but not the other; it depends on the nature of your business.
Professional indemnity insurance protects your business from financial loss in regard to claims bought by third parties where they’ve lost business or money due to designs, advice or a professional service from your company.
Whereas public liability insurance is protection from claims bought by a third party for injuries, illness or property damage caused by your business.
Knowing how much professional indemnity insurance your business needs can be challenging.
The amount of PI insurance you need will depend on several factors, such as:
This can be subjective and won’t give you a definitive answer on how much cover you need. Generally speaking, it’s a good idea to go for higher limits to ensure you don’t get left with a massive bill for legal fees or compensation your PI insurance doesn’t cover.
Professional indemnity insurance is a must if you’re a freelancer or sole trader who offers professional services, such as marketing, copywriting or financial advice.
If mistakes in your work or the advice or services you provide as a sole trader cause one of your clients to lose out financially, they could make a claim against you.
Without professional indemnity insurance, you would have to pay any legal fees or compensation from your own pocket. As a sole trader, you are personally liable for any money your business owes.
Professional indemnity insurance covers a wide range of cases, but to help you get a picture of the kind of claims it covers, here’s a few examples:
