The New Year is a time where many people set new personal and business goals. It’s also the most popular time for people to start a new business.
Between all of the thinking and planning, by the time you finally make your new business a reality, you find yourself wrapped up in long to-do lists in order make your new venture a success.
Insurance for your start-up is probably the last thing on your mind – but it really shouldn’t be.
Whilst insuring your business for hundreds of thousands, if not millions of pounds may seem extreme when you’re just starting out, don’t assume that it is not necessary.
No matter how small your business is, a claim made against you could really put your business’ finances at risk and even force you to close your business – before you even get going.
Does your start-up need Professional Indemnity Insurance?
If your business provides professional advice or design services for which your customers depend on, such as accountants, architects, surveyors, IT consultants, business consultants etc.; you should consider getting professional indemnity insurance to protect yourself from the risk of crippling compensation claims and legal fees.
Even though you want to conduct your business seriously and are aiming to provide the best service and results, sometimes things can go wrong and you may accidentally provide the wrong advice or make a mistake, resulting in your client suffering a financial loss.
Here are some examples of cases where professional indemnity insurance is needed…
- If you’re a business consultant that advises your client to make significant changes within their business that subsequently leaves them with no customers, they could make a claim against you.
- If you’re a builder or design contractor that makes a mistake that results in your client suffering a financial loss or even injury or death as a consequence of your error, they too could make a claim against you.
In any case, the claims may be so substantial that you simply can’t afford to pay the legal fees and compensation due, resulting in huge debts and the risk of closing your business completely – not something you want when you’re just starting up.
What Will The Policy Cover?
Considering Professional Indemnity Insurance is extra important when you’re in start-up mode as you are still finding your feet in the world of business and you’re running the risk that things might ultimately go wrong.
Selecting a policy that covers you in the event of a claim can protect you from large bills and stressful complications. With the right policy in place you can relax into your new business without the fear of having to deal with a client making a detrimental claim against you.
By taking out a Professional Indemnity insurance policy, you prevent significant impact on your new business. The Insurer usually appoints a specialist litigation lawyer to ensure the case is handled correctly, working alongside you in order to resolve the matter as quickly and economically as possible so that you can continue focusing on the day to day running of your business.
This policy covers such claims as legal fees and compensation owed to the claimant.
What Will The Policy Not Cover?
- Incidents that occur within your business before your policy starts
- Any deliberate intent of wrongdoing
What Will Professional Indemnity Insurance Cost?
The cost of your policy will vary based on the level of risks involved within your business. Prices for an annual policy start at £60*. Considering the protection and peace of mind this can bring for you and your business, it’s a small price to pay.
Is Professional Indemnity Insurance A Legal Requirement?
Some professions, such as accountants, legitimately cannot operate without professional indemnity insurance. Some professions are also required to have a Professional Indemnity insurance policy in place as a condition of being a trade association member.
If your profession is not legally required to take out such insurance and you’re contemplating going without, consider this; Not only does professional indemnity insurance provide your business with security in the event of a claim, it also provides peace of mind for the customers and clients you work with. Having a policy in place can be the difference between securing a contract with a client and losing out to a competitor.
Start-ups can be complicated enough without the unnecessary stress of a legal battle and a tarnished reputation.
If you’re starting a new business this year, taking out the best professional indemnity policy for your business should be up there with your top priorities.
Not sure if you need any other insurance for your start-up?
Check out this article: ‘Insurance Every Business Needs’.
*Based on a Accountant rated in category A. For a limit of indemnity of £50,000 on an Aggregate Claims made basis, Premium includes IPT at the current rate and are for firms with fees up to and including £50,000 and trade risks/contractors with turnover up to and including £500,000.