If you run a business that offers a professional service and you give expert advice to clients, you should consider taking out professional indemnity insurance, also known as professional liability insurance.
Does Your Business Need Professional Indemnity Cover?
Traditionally, it's been professions like law and accountancy that have taken out professional indemnity insurance, but nowadays, companies involved in areas such as IT, training and business consultancy are also seeking to protect their businesses from potentially high legal costs if a client decides to sue.
Here are just some of the types of professional indemnity insurance that are available:
- Accountants Insurance (including chartered accountants and certified accountants)
- Advertising Indemnity Insurance (including advertising agents, advertising agencies and advertising consultants)
- Alarm Installers Insurance (including companies advising on security alarms, fire alarms and emergency panic buttons)
- Architects Insurance (including architectural technicians and landscape architects)
- Biogas Consultants Insurance
- Bookkeeper & Bookkeeping Insurance
- Business Consultants Insurance (including HR consultants)
- Consulting Civil Engineer Insurance (including engineering consultant, site engineer & setting-out engineer)
- Designers Insurance (including interior designers, garden designers, bathroom designers & design consultants)
- Dry Lining consultants insurance
- Energy Consultants Insurance (including energy assessors and renewable energy consultants)
- Estate Agents Insurance (including letting agents and property management)
- Financial Advisers Insurance
- Freelance Consultants Insurance (insurance for freelancers and freelance contractors in most industries including those working in IT, construction, rail, aerospace, oil, gas, water, energy, renewable energy, wind farms and offshore)
- Graphic Designers Insurance (including computer graphic designers)
- Health & Safety Consultants Insurance (including health and safety training, health and safety inspection services and health and safety consultancy)
- Healthcare Professionals Insurance (including occupational health consultants)
- Horticultural Consultants Insurance
- Human Resources Consultants Insurance (including HR consultants)
- Interim Management Insurance
- IT Consultants Insurance (including IT contractors, IT architects, IT project managers, user experience designers, analysts, developers, big data, cloud computing and security specialists)
- Legionella Testing & Legionella Risk Assessment Insurance (for companies involved in legionnaires' disease testing)
- Life Coach Insurance
- Management Consultants Insurance
- Market Research Company Insurance
- Marketing Consultants Insurance (including online marketing, digital marketing and SEO)
- Media Consultants Insurance
- Measured Building Surveyors Insurance
- Project Manager Insurance
- Public Relations Insurance
- Publishers Insurance (including insurance for independent publishing companies)
- Quantity Surveyor insurance
- Quality Assurance Consultants Insurance
- Recruitment Agency Insurance (including employment agencies)
- Setting Out Services Insurance
- Social Media Consultants Insurance (including social media management, social media managers, social media strategists and social media consultancy)
- Software Developers Insurance
- Solicitors Insurance
- Surveyors Insurance (including chartered surveyors, land surveyors, expert witness surveyors, building surveyors and estate management)
- Tax Consultants Insurance (including capital allowances specialists)
- Telemarketing & Lead Generation Company Insurance
- Telecommunications & Mobile Telecoms Consultants Insurance
- Training Consultants Insurance (including training services)
- Website Designers Insurance (including website developers)
If your business isn't listed above, don't worry, we can still probably obtain a quotation for you.
Professional Indemnity - A Few Tips
Here are a few things to think about when arranging Professional Indemnity insurance:
- What are your legal obligations?
- Is the business description relevant to your business?
- Is the limit of indemnity adequate?
- How much is the policy excess?
- Check the retroactive date
- Check the policy exclusions
Professional Indemnity insurance protects your business in case you are sued by a client who is unhappy with your service and feels that you are to blame for a financial loss they have suffered.
Your professional indemnity policy covers the cost of defending claims made against you, so you won't have to pay the legal costs. If you have made a mistake, the insurance company will pay appropriate compensation on your behalf - subject to policy terms and conditions.
The cost of professional indemnity insurance depends on a variety of factors including the type of work you do, the size of your business, the sort of clients you work for and whether or not you have had any previous claims or losses. It also depends on the limit of indemnity and how wide the cover is.
As well as basic negligence cover, you can add on things like advertising cover - in case you accidentally use unlicensed images on your website for instance and cover for libel and slander.
You can also include insurance for loss of documents and unintentional breach of confidence.
In our experience, we often find that the cost of professional indemnity insurance is less than people expect.
The indemnity limit you need for your professional indemnity insurance depends on the type of work you are doing and the sort of clients you work for.
You need to think about the maximum financial loss your client could suffer as a result of a mistake you might make and add on possibly substantial, defence costs.
Limits are available from £100,000 up to £5m. Higher limits are more expensive than lower limits - you get what you pay for.
Sometimes the limit may be dictated by your client because they require you to have a certain level of cover before you can tender for their particular contract.
It's a good idea to discuss the limit of indemnity with your insurance broker, who should be able to give you guidance. You can request quotes for different limits to see how the cost compares.
The retroactive date on your professional indemnity policy is usually the start date of your business or the inception date of your first professional indemnity insurance policy.
If you are getting alternative quotes at renewal, check that the retroactive date is correct. If unsure, discuss it with your insurance broker.
The reason a professional indemnity insurance policy sometimes has a retroactive date is because it is written on, what is known as a 'claims made' basis. This means that, unlike other liability insurance policies, it only covers you for claims that are made during the period of insurance.
If the insurance is cancelled or cover ends for some reason, there won't then be any cover if a claim comes in. Because of this, if your company ceases trading or you decide to sell it, it's important to consider buying run-off cover to protect you in case a claim comes in for previous work.
As a business owner, how do you decide where to go to find the best professional indemnity insurance?
Professional indemnity insurance is technical and it’s therefore best to speak to an independent business insurance broker for advice and to get a competitive quote.
Look for an insurance broker that specialises in commercial insurance and offers a personal service. They will usually get you several quotes from different insurance companies and then recommend the product that best fits your requirements.
You can buy professional indemnity insurance online but, in our opinion, this is risky as it is then up to you to decide whether the cover is right for your business. This can be tricky when you are unable to ask questions or discuss the policy terms and conditions. Policy wordings for this type of insurance are often long and complicated and a good business insurance broker will be able to draw your attention to the key sections.
Most sites that offer on-line quotations for professional indemnity insurance have a limited list of business descriptions to choose from. Your business may not exactly fit one of these categories.
If you deal with a business insurance broker they will be able to specify exactly what your business description is, so that the insurer knows what they are insuring. Getting this right is important because the business description is one of the first things a claims handler will look at in the event of a claim.