Professional indemnity (PI) insurance is a business insurance that’s intended to financially protect you and your company. This insurance policy will cover the substantial costs your business could face if a client alleges that you have been negligent in the advice or recommendations you gave them.
If you do not take out PI cover and you are found to have financially damaged a client’s business or reputation, you could be ordered to pay substantial compensation. These fees could potentially amount to hundreds of thousands of pounds. If considering these risks, you have decided to take out PI insurance, here’s the questions you should ask when you’re looking for a policy…
Do I need professional indemnity insurance?
To avoid unnecessary business expenses, you should obviously consider whether purchasing PI insurance is appropriate for your company. If you do provide your clients with advice, opinions or recommendations of any form, it’s highly advisable you invest in a PI policy. Whilst it’s usually not compulsory, taking out PI cover will financially protect your business if a client alleges that the advice you gave them was negligent.
Despite this, in certain careers, being a member of the allied professional body requires you to take out professional indemnity insurance. This may be the case if you’re an accountant, solicitor or financial advisor, or you work in a profession that involves regularly giving advice to clients. Further, some clients will specifically demand that you have PI insurance cover in place before you exchange contracts. Overall, even if your company is not obligated to take out PI insurance, it should be a form of cover you carefully consider, particularly if you’re a self-employed consultant.
What does PI insurance usually cover?
PI insurance is designed to cover the resulting legal fees and compensation charges if you are found to have given your client negligent advice. If you fail to take out PI cover and a client does allege your expert advice or consultancy service has caused them financial issues, your business could be liable to pay a substantial sum. Taking out PI insurance can result in any costs being covered by your insurance company.
PI policies will typically cover you against claims alleging your business is responsible for a breach or negligence of professional duty, negligent misstatement or misrepresentation or libel, slander or defamation. Further, your PI insurance should protect you from claims arising from infringement of intellectual property rights, breach of confidentiality, employee dishonesty or the unintentional transmission of a computer virus.
Does your PI insurance policy provide retroactive cover?
Retroactive cover is another important factor to consider when you’re choosing a PI insurance policy. This additional cover is designed to protect you against claims arising from work you completed before the official start date of your PI policy.
This is an extremely useful level of protection as a claim for negligence resulting from your recommendations may occur sometime after your advice was first given. The period of time for which retroactive cover is applicable will be detailed on your PI insurance policy documents.
Do I need other forms of liability insurance?
In addition to professional indemnity insurance, you should consider if the nature of your business requires you to take out other forms of liability insurance. If you own a business where injury to members of the public or damage to another’s property could potentially occur, public liability insurance is also a sensible investment. Public liability policies are designed to cover compensation costs if someone makes a claim against your company for personal injury or property damage.
It’s also essential you’re aware that if your business has employees of any nature, it’s a legal requirement that you take out employers’ liability insurance. This insurance will financially protect you should your employee seek compensation for an injury or illness resulting from the work they carried out for your business.
Overall, taking out professional indemnity insurance can give you peace of mind. Having this cover in place protects your business against unforeseen errors or ommissions in the advice and recommendations you give to your clients.
If you’re looking for a friendly and trustworthy insurance company to arrange your PI cover, then constructaquote.com can help as we specialise in small business insurance.