What does professional indemnity insurance cover?
You should consider taking out professional indemnity insurance if your business gives advice or offers a professional service to other businesses. It covers you if you are negligent or make a mistake which causes a client’s business to suffer financial loss.
For example, if an architect makes a mistake in the plans for a construction project and it is only discovered once the building work is underway and materials purchased, the client would be likely to lose money through time for re-building and the cost of wasted materials. The architect would be liable for this cost.
Types of business that often take out professional indemnity include accountants, IT consultants, business consultants, journalists, architects, financial advisors, engineers and many more.
An example of a claim:
An employee accidentally sent an email containing confidential customer information to an incorrect party. The customers sued the firm for breach of confidentiality
What did the insurance company pay?
The professional indemnity claim costing £35,000 including legal costs covered by the insurance policy.
What did the insurance company not cover?
£250 Excess plus the cost of loss of reputation of the firm and loss of future contracts from that customer.
What level of professional indemnity cover do you need?
In many cases, the client dictates the level of professional indemnity required but even where this is not the case it is worth finding out their expectations as to insurance before taking on the work.
Details to look out for
- Check the exclusions on the policy before purchasing it
- Find out what level of cover your clients expect
- The policy includes legal expenses cover
