What is professional indemnity insurance?
Professionals who provide skills, knowledge or specialist services to clients may benefit from professional indemnity insurance. It helps cover the cost of claims arising from mistakes, negligence or misuse of information.
Examples of when professional indemnity insurance may be relevant include:
- Providing expert services: if you make an error in your designs or calculations, a client can file a claim against you
- Handling client information (such as personal data ): if you accidentally disclose personal data or infringe on a client’s legal rights, they could take legal action
- Meeting client requirements: some clients insist that contractors or consultants have professional indemnity insurance before working with them
- Offering consultancy or advice: if your advice or professional opinion is incorrect, a client may claim for resulting losses
Who requires professional indemnity insurance?
Because of the risks outlined above, professional indemnity (PI) insurance is particularly relevant to:
Many professionals also need PI insurance to comply with their governing body’s regulations.
Professional indemnity insurance protects professionals against claims relating to:
- Breach of confidentiality
- Defamation
- Dishonesty
- Misrepresentation
- Negligence
- Malpractice
- Breach of copyright
- Loss of documents
- Dishonesty of employees
Certain types of business also take out PI insurance, particularly those whose services rely on specialist knowledge or advice. These may include:
- Advertising agencies
- Public relations (PR) agencies
- Design agencies
- Consultancies
Is professional indemnity insurance required by law in the UK?
Professional indemnity insurance is not a legal requirement in the UK. However, some professional bodies require members to have PI cover to practise. Without it, professionals may find their ability to work restricted or their reputation affected. Additionally, operating without coverage exposes you to significant legal costs and compensation payments if a client makes a claim.
What professional indemnity insurance does not cover
There are some claims that professional indemnity insurance typically does not cover. These can include (but are not limited to):
- Intentional misconduct or fraud
- Claims resulting from criminal activities
- Breach of contract
- Non-professional liability claims (covered under general liability policies instead)
- Known claims made before the insurance was taken out
- Claims that businesses anticipated before they took out insurance
To confirm exactly what is included or excluded, always review the terms and conditions of the policy or consult the provider directly.
Similar forms of cover to PI insurance
Some professionals may also wish to take out other forms of insurance alongside PI insurance, such as:
- Public liability: protects against claims made by members of the public against your business regarding accidental injury or damage to property. Product liability insurance is often included in UK public liability cover, protecting small and medium-sized enterprises (SMEs) against claims arising from faulty products they supplied or sold.
- Employers’ liability: covers compensation if an employee claims that working for you has caused an injury or illness. All UK employers are required to hold employers’ liability (EL) insurance under UK law. Fines may amount to £2,500 per day for non-compliance.
- Business equipment: covers the costs of replacing business equipment if it is lost, stolen or accidentally damaged.
- Professional vehicle insurance: required for businesses or self-employed individuals who use a vehicle for work purposes, including travelling to visit clients or work sites.
Where to find UK professional indemnity insurance
There are different ways to find PI insurance in the UK, including:
- Specialist professional indemnity brokers: provide specialist advice on professional indemnity insurance, offering comparisons of the different options across insurers to secure the best deal.
- Business insurance brokers: offer PI insurance alongside other forms of business insurance that could be relevant or essential to your operations.
- Professional accredited bodies: some accredited bodies require members to hold PI cover and can recommend trusted insurers.
- Direct from insurers: policies can also be purchased directly from insurance providers.
How much does PI insurance cost?
The cost of professional indemnity insurance depends on several factors, including:
- The size of your business
- The nature of your profession or sector
- Your annual turnover
- Your claims history
If you offer skills, knowledge or advice as part of your business service, you may need to be covered by professional indemnity insurance. While not required by UK law, some industries mandate PI coverage for practice, and clients may prefer you to have it. Find PI insurance through specialist brokers, professional accredited bodies and more.
