What is Professional Indemnity Insurance

18/06/2013 -- Mary Simpson
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Professional indemnity insurance, also known as PI insurance, is a type of liability cover designed to protect an individual or business against claims made by clients for loss or damage due to negligent advice or services.

As well as cover for compensation, this type of insurance is designed to cover legal fees and costs (either exclusive or inclusive basis over the insured sum - you'll need to check).

The most common professional liability lawsuits arise from:

  • Negligence, omission or error.
  • Unintentional breach of intellectual property rights (copyright, trademarks, broadcasting rights, passing off ie Breach of Implied Statutory Terms under the Sale of Goods Act 1979 and Supply of Goods and Services Act 1982).
  • Loss of clients' original documents or data (these could be damaged, lost in the post or even stolen while in your care).
  • Unintentional slander or libel.
  • Unintentional misuse or breach of confidential information (Data Protection Act) or breach of confidence.

Why Do I Need Indemnity Insurance?

If your professional advice or services fall short of a client’s expectations and result in financial loss or damage, you could face a costly claim for compensation.

Without professional indemnity cover, a self-employed individual, freelancer, contractor or small business could go under.

Who Needs Professional Indemnity Insurance?

Indemnity cover is recommended for all individuals and companies who provide knowledge, skills or advice as part of their profession.

Solicitors, accountants, architects, chartered surveyors, financial advisers and most medical professionals need it, as they are required by their professional bodies or regulators to have PI insurance.

What is Covered/Excluded

Covered:  Compensation costs to clients and related legal costs.
Exclusions:  Claims above an agreed amount, cover after the policy has not been renewed, specific vetoed activities, overseas work and retroactive cover. 

If you retire or leave your profession, remember you can be sued for up to six years after an alleged negligent act. You can buy what’s termed a run-off policy to cover you for this period.

How Much and the Cost

Check with your professional body or association, also research compensation claims against professionals in your field.

Standard professional liability cover levels range from £1m, £2m and £5m up to £10m.  £2m to £5 million worth of PI cover is generally considered adequate but go for the highest possible level you can afford.

Approx. costs for computer consultancy are £170 per annum for each £100,000 of cover

How Do I get Quotes?

Depending on the complexity of professional indemnity cover you need you can buy online or contact an independent insurance broker. Try our simple 1 page online form to have specialist brokers call you back.