Professional Indemnity Insurance
Professional indemnity insurance will protect you against the mistakes you make in the course of your work for clients.
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- Your duty of care – what this means
- Professional indemnity protects your finances
- Professional indemnity fixes mistakes
- Professional indemnity levels the playing field
- Professional indemnity jargon busting
Mistakes, slip-ups, gaffes: we all make them. And that's exactly why anyone who provides a professional service should protect themselves with indemnity cover.
However, professional indemnity (PI) insurance is by no means straightforward. We've done our best to explain it simply below, but if you're still confused or would like to discuss your requirements further, please give us a call on 0845 370 9030 between 9 and 5.30, Monday to Friday.
Your duty of care – what this means
As a professional, you owe a legal duty of care to your clients.
Duty of care exists because you, as a professional, are considered to possess above-average skills. Joe Public relies on you to provide these skills for them when they purchase your product or hire your services.
If your work fails to reach a reasonable standard, you effectively breach this duty of care. Your unhappy client could claim compensation from you for the losses and expenses caused by your negligence.
Professional indemnity protects your finances
A professional indemnity insurance policy will pay the legal costs of defending a claim against you and any compensation you're legally liable to pay.
Imagine a surveyor, employed to value a house. The surveyor values the property at £140,000 and a mortgage is drawn-up based on this. When the new owners move in and spot cracks in the property, they request a revaluation.
The revised value is £15,000 less, so the surveyor is taken to court and sued for the discrepancy. His professional indemnity insurance covers his legal defence costs and the compensation he has to pay.
Professional indemnity fixes mistakes
A good professional indemnity insurance policy will pay the costs of rectifying a mistake made by your company: preventing a more expensive court case.
Imagine a designer, employed to create a brochure for a furniture company. The final proof is signed off by the designer's client, but the wrong disk – with an earlier version of the brochure – goes to the printers.
As a result, your unhappy client is stuck with 40,000 brochures riddled with spelling mistakes. It's inevitable that they'll refuse to pay, and may even claim against you for causing them to miss their important deadline.
Your professional indemnity policy will pay for the cost of a reprint, keeping you and your client happy.
Professional indemnity levels the playing field
How good is your legal knowledge?
Being pursued for damages by a large company can be a daunting experience. Being able to turn to your professional indemnity insurers gives you that priceless peace of mind.
Insurers are experienced in these types of claims and have access to specialist litigation lawyers. And they're all on your side, because they too want the dispute settled quickly and cost-effectively.
Professional indemnity jargon busting
"Claims made basis"
Many businesses are required to purchase insurance under the conditions of a contract. However, professional indemnity should never be purchased just for the duration of a contract.
All professional indemnity policies are written on what's called a claims made basis. This means it's the policy you have in force when the claim is made that pays out, rather than the policy you had when the work was carried out.
So, if you complete your contract and you cease your professional indemnity insurance, you will not be covered for any subsequent claims. It's therefore important to see professional indemnity as a long-term commitment.
"Excess"
The excess is the amount of each and every claim that you have to pay. Your policy will respond above this level up to the limit of indemnity. It's no different to your car insurance.
If you're looking for a rock-bottom premium, expect to pay a large excess.
"Retroactive cover"
If you already have professional indemnity and are changing insurer, make sure that your new policy includes retroactive cover. This protects you against mistakes made in work carried out before you bought the policy or changed insurers.
"Run-off cover"
When a professional retires, he or she may want to keep their insurance intact in order to protect against claims arising from previous work. This is known as run-off cover. It stands to reason that the likelihood of a claim will reduce with time and, accordingly, a smaller premium will be charged.