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Professional Indemnity Insurance

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Professional Indemnity Cover
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What is Covered/Excluded?

Professional indemnity insurance protects you against damages you become liable for mistakes such as errors of judgement, basic administration errors, mislay or damage clients' documents etc. resulting loss of business and damage to reputation.

Exclusions

These may include: Claims above an agreed amount, cover after the policy has not been renewed, specific vetoed activities, overseas work, retroactive cover.

How will Professional Indemnity Insurance protect my business?

If you do make a mistake - an error of judgement, say - or there's a basic admin error which in turn leads to a dispute with a client and that client is so dissatisfied with the resulting loss of business and damage to reputation that it results in a claim for malpractice against you in court, then your insurer can represent you.

Even if you lose, a professional indemnity policy can protect you against any damages you become liable for, up to the insured level.

Most professional liability insurance policies will also cover you for the cost of repairing a mistake which, if not sorted, could result in a much larger claim.

For example, your professional indemnity insurer could underwrite the cost of sorting out a basic error at an early stage - a simple typo, say - before thousands of high-cost glossy brochures are printed out resulting in a large damages claim by the client.

Your policy should also cover you if you mislay or damage clients' documents, or if an employee steals clients' money.

Consider the worst-case scenarios that could happen in your particular line of business, and raise these with your insurer - will you be covered?

Professional Indemnity pitfalls

Length of cover:

Professional liability insurance is for life, not just for the life of a contract.

Things can come back to bite you. Suppose, for instance, that you are an IT specialist with a 6-month contract to provide the know-how to build a system for a particular company.

Don't simply buy professional liability to cover the exact period of the contract. If your insurance provider agrees to such a short-term period of cover, then look for another insurer. All public liability insurance policies relate to the policy in place when claims are made.

What happens 12 months down the line, if some serious problems surface, and you have no professional liability insurance in place...?

The policy paid for which related to the length of your original 6-month contract is no longer relevant.

It's a similar scenario if you intend retiring soon, or are winding the business down and moving on to a new area of operations.

Make sure your professional liability cover is still in place, even though you are no longer active in the particular field you originally had professional indemnity insurance cover for.

Limits of Indemnity

Check whether limits of indemnity relate to any one claim ie each and every claim or are an "aggregate," ie for all claims.

Exclusions

Check whether specific activities are vetoed under the policy, and whether you are insured to work abroad, if your business is likely to take you outside the UK.

Excess

As in every other line of insurance, the excess you have to pay if you have to make a claim can vary wildly. Always read the small print before you sign on the dotted line.

Retroactive cover

If you already have professional liability cover and are moving to new insurers, make sure that the policy has "retroactive cover" built in to cover work insured under your previous policy. Often there's a delay between an event and a resulting claim, so you need to be covered both at the time of the event and when the claim is made.

This means that if you plan to cancel your policy when you wind up your business or retire you should arrange what is known as "run off" cover for a period of time afterwards.

Also, if you do want to change insurers, make sure that your new insurer will accept new claims for prior incidents.

How can I minimise claims against my business?

Make sure that any contracts drawn up clearly define your responsibilities, and that any concerns/complaints are dealt with promptly.

Keep an accurate record of all complaints and your actions to redress these.