In real terms, professional indemnity insurance means peace of mind for you and your clients if things don’t go exactly as they should do. Whatever business you’re in, you work hard to provide the best service you can and that is what clients expect. Don’t let an unexpected error trip up or define your business but make sure you have the right cover in place to keep yourself moving.
What is professional indemnity insurance?
Professional indemnity insurance is there to protect your business. If one of your clients alleges that there have been faults within your work. Nobody expects mistakes to happen but they still do. They can also cost your clients a large amount of money. Professional Indemnity Insurance is more commonly known as PI insurance. It can cover you against negligence, breach of confidential information or data, and poor advice which results in a financial loss for your client. It is thus an important insurance policy to have.
When things go wrong. Whether it’s your fault or not it may be down to someone else in your business. Professional indemnity insurance can cover you up to £10M for compensation costs and legal expenses. So you can keep running your business whilst the claim goes on.
Do I need professional indemnity insurance?
If your business provides some form of service and advice as well as handles sensitive data. Or it has a responsibility for you to let your property on behalf of yourself or your individuals. Then you must consider whether professional indemnity insurance is needed to protect your business. This will cover compensation of legal costs should a client take you to court for your mistakes or negligence in any work.
You will have some professional bodies and regulators note that it is a legal Rule for members to hold professional indemnity insurance. Because of the risk that they are associated with. Examples of these types of professions are people such as accountants, solicitors, surveyors, health care professionals, engineers, estate agents etc.
Is professional indemnity insurance mandatory in my business?
You should check especially if you are with a professional body whether PI insurance is required to become a member. It may be you will find that some clients may not even deal with you unless you hold a current PI insurance certificate.
You may need Professional Indemnity insurance if you:-
- Provide expert, skills or advice to clients
- Have access to client’s confidential information
- Produce materials that could infringe intellectual property rights
- Provide a professional service and can be challenged on your work
Any type of cover can be tailored to your business or sector as it is needed. It is crucial that you choose the right and correct business insurance policy that is tailored to your business and the sector you work in. You will find that often professional indemnity insurance is catered for the individual business. Rather than the person themselves.
How much professional indemnity insurance cover do I need?
The amount of PI cover has different factors in it. It depends on whether the nature of the work and the size of your clients. To work out how much PI cover that your business needs think about what your biggest contract would be and how much you would need. A minimum amount of coverage may also be required by your Governing body and you should talk to them.
In the worst-case scenario what would be the most cost to rectify a problem to include legal fees and any losses incurred by that client. This will then give you some form of a guideline on how to work out the total amount that is needed.
How much does professional indemnity insurance cost?
The cost of professional indemnity insurance does depend on the factors of your actual business and the amount that your business needs. It also deals with the nature of the work that you do. Quotes can start from as little as £100.00 but they could be up to hundreds of thousands depending on what type of cover you need. Cover can be tailored to a wide range of professionals and to protect the most common of risks in your business that you could face.
Is professional indemnity insurance tax deductible?
Yes, professional indemnity insurance is tax-deductible.
It is also known as business insurance and is considered an allowable expense. They consider it is an essential cost that helps keep your business running smoothly which you don’t pay tax on.
What type of cover do they provide?
There are different types of cover for different types of professions. So whilst the list below is not an exhaustive one it gives you a sign of what these types of policies cover.
You will be indemnified against any claim made against you from the following:-
- A negligent act, error or omission
- A negligent statement or misrepresentation
- Dishonest or fraudulent act or admission by an employee
- Liable, slander or defamation
- Breach or misuse of confidentiality or any right of privacy
- Infringement of intellectual property rights including any act of passing off
- A decision by an adjudicator appointed to resolve a dispute under the schemes of construction contracts
- An award by an arbitrator or tribunal of arbitrators and various other areas
- Any other civil liability
The insurers will normally pay defence costs in defending any such case.
The insurer will indemnify against any claim arising from a negligent act or omission carrying out any professional business that involves asbestos. This could be from a claim arising out of actual fear or injury or from a professional survey for instance.
Disputed fees cover
If a client refuses to pay for work undertaken then you would be covered. To legally be able to take them to court and dispute this including any subcontractor. There is a maximum liability for this normally on any one policy
Awards by ombudsman
This would normally insure you and indemnify you for any amount payable from an award. Against any reasonable necessary costs or steps insured is directed by the ombudsman
Loss of documents
This covers you for a period of any loss of documents as well as insuring them against any reasonable opinion replacing or restoring them. These can normally be in electronic format or paper. It could involve any impact or virus on your software or any unauthorised access to your system.
Statutory liabilities cover
It would normally cover you for any statutory liabilities in relation to your profession but these are very much individual to the business.
Normally these will be covered up to a certain percentage of any investigation in relation to the conduct from an investigation or prosecution although there are sometimes limits as to the amount.
Joint venture cover
This covers you for any claim against a joint venture partner but again it would be relative to the profession.
Court attendance costs
This would normally cover you up to a certain amount on a daily basis to attendance in a court or for an employee that had to attend court. Again there would normally be some sort of limit.
There is normally some form of small cover for pollution costs but again depending on the profession.
There will always be exclusions to any particular policy and these will often relate to the actual act itself. If for instance, you were insolvent it would not cover you and any infringement of any patent would not cover you.
You will also have from your insurance company details of any policy conditions which you should read through. It is so important that you understand what you have to do and what you can and cannot do with respect to your business.
We can provide you with a policy that will be relative to the business that you have and what cover you need. We can do the following:-
- Have flexible PI policies
- Cover you up to a certain amount of legal costs and compensation as required
- Cover you for your specialist knowledge within your industry
When dealing with professional indemnity insurance. You must understand that there will be a lot of information required when you first look to take out a policy. We try our best to ensure that you have as little to deal with as is possible. But unfortunately with the type of cover that it relates to i.e. negligence etc then there will be a lot of questions that you will need to respond to. You will find that most insurance companies will keep the previous application forms that you have carried out over the years which could help you with filling these out. We are more than happy to go through them with you on an individual basis and talk you through exactly how to fill these out. It is most important that you ensure that whatever you complete on the proposal form is accurate and is not guessed these are extremely important documents and are the basis upon which the quote would have been obtained. If the information is incorrect then the policy will not cover what you need.
Please do not hesitate to contact us with your requirements.